BFIs allowed to purchase loans of inter-bank loan defaulters
Useful Links
» A new way to read online, exact replica of your daily and magazine
» For all you tweety fans out there!
» Allows you to find only those news from any date you choose!
» Search any news/ articles by author/ category/ date/ keyword
KATHMANDU, JAN 05 - Nepal Rastra Bank (NRB) has finally addressed the long standing demand of banks and financial institutions (BFIs) that they be allowed to purchase loans of their peers that default inter-bank loans.
After seven commercial banks struggled to recover loans provided to troubled Nepal Share Market and Finance Limited (NSMFL), Nepal Bankers’ Association had formally requested to central bank to address the issue.
In a circular issued on Wednesday, the central bank, however, has set a condition that BFIs should at least purchase loans worth twice the amount of the outstanding inter-bank loans. “After purchasing loans, the buyer should return the additional amount to the seller,” said NRB Spokesperson Bhasker Mani Gnawali.
According to Gnawali, lending BFIs will have to be ready to purchase loans irrespective of their quality—either good or bad. “Lending banks cannot say that they will only purchase good loans,” said Gnawali.
Bankers have welcomed the new NRB circular. “I welcome this directive,” said Bijay Pant, CEO of Janata Bank Nepal, which has Rs 180 million to recover from NSMFL.
However, some bankers expressed dissatisfaction over the time taken by the central bank to introduce the directive, as they are required to make 25 percent provisioning of unpaid loans after mid-January, and the chances of completing the loan purchasing process by the date are slim.
“With only about 10 days left for second quarter to end, we don’t have enough time to assess the loans, get NSMFL’s consent and get the central bank’s approval,” said a banker who had extended millions of rupees to NSMFL in inter-bank lending.
Posted on: 2012-01-05 08:55
Post Your Comment