Six Commercial Banks are Affected by Bad Loans, if the Limit is Crossed, they Will not be Able to Distribute Dividends

Kathmandu : Due to bad loans, six commercial banks are unable to distribute dividends. According to the first quarter financial statement of 080/81, bad loans of commercial banks reached 3.4 percent on average.

During the review period of the last financial year, bad loans of banks were 1.66 percent. Bad loans have increased significantly in the first quarter of this financial year. Banks are saying that bad loans have increased due to problems in loan recovery. Due to bad loans, the profit of banks has decreased by 17 percent. They have allocated a large amount of income to impairment charges.

According to the financial statements released by the bank, the highest bad loans are of Krishi Bikas Bank and the lowest are of Everest Bank. If bad loans continue to increase like this, it seems that it will be difficult for 6 commercial banks to distribute dividends.

Bad loans of Kumari, Nepal Investment Mega, Laxmi Sunrise, Himalayan and Global IME have increased significantly. The bad loans of these banks are 4.89 percent, 4.83 percent, 4.69 percent, 4.67 and 4.38 percent respectively. Similarly, bad loans are increasing and may exceed the limit of 5 percent.

After exceeding the limit of 5 percent, the guard line of the National Bank will be broken and the distribution of dividends will not be allowed. If that happens, there will be a situation where you have to focus only on debt recovery without further business expansion.

The possibility of the financial situation of the banks will also increase if the bad loans become serious. According to the instructions of the National Bank, 100% loan loss should be arranged for the loans classified in the bad category.