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‘Squeezing NPL to 5 pc impossible’
KATHMANDU, JAN 10 - Officials of two state-owned commercial banks, which are currently under the foreign management contract, formally declined any possibilities of scaling down the volume of non-performing loans (NPL) to five percent within the contract period.
The Chairman of the Board of Directors of Nepal Bank Limited (NBL) and Rastriya Banijya Bank (RBB) argued that in no case the huge volume of non-performing loans of more than 55 per cent, can be reduced to less than five in two years’ period.
"If we announce so, it would be a mirage," said Bharat Bahadur Karki, Chairman of the NBL Board of Directors. The central bank should judge the performance of reform measures in terms of other financial situations, he argued.
On the occasion Basu Dev Ram Joshi, the Chairman of Board of Directors at RBB said that it is impossible to scale the level down under the current circumstances.
They pointed out the slow pace of legal reforms and argued that some legal complications are also contributing to make target the impossible.
According to a signed agreement of management contract, the central bank should establish an Asset Management Company, which should manage the non-performing loans. The enforcement of the act, though vowed since the past two years, is yet to take a final shape.
Both were speaking at an interaction programme on Financial Reform and Corporate Responsibilities organised by the Independent Business News in the capital today.
Governor of Nepal Rastra Bank, Dr Tilak Rawal, however, said that the central bank would evaluate the success of the management ‘against agreed upon deliberates’. "We have signed a contract and thus should follow it," he added.
Dr Yubaraj Khatiwada, member of National Planning Commission (NPC) pointed out that the financial reform does not deals with two commercial banks, but also with other financial institutions.
"Financial sector can be more productive, if corporate houses upgrade their capacities, the banking clients change their perceptions," he said. He added that the sector can perform well if regulatory frameworks and legal reforms go side by side.
"Number of financial institutions have increased in the past due to the liberal economic policy, but most of them are centered to urban, going for short term tending," he said adding that the reform should address these anomalies too.
Dr Bishwombhar Pyakuryal expressed doubt that the current pace of financial reforms can bring the desired outcomes. "Nepalese economy is a crashed economy and thus we cannot afford any failure,"he said.Posted on: 2004-01-11 04:24
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