Banks are in strong state: NBA

 Banepa, Feb. 24

President of Nepal Bankers Association (NBA), Sunil KC, said that the banks are in a strong state with enough liquid assets and better management practices.

"Even if the non-performing loans have increased, they are not unmanageable, and no bank is going to collapse," he said while speaking at the advanced banking training programme organised by Nepal Association of Financial Journalists (NAFIJ) in support with Nabil Bank in Banepa on Saturday.

KC, who is also the Chief Executive Officer (CEO) of NMB Bank, said that banking system has about Rs. 1800 billion liquid assets due to their investment in government bonds as well as mandatory cash balance and Statutory Liquidity Ratio (SLR).

Banks have invested more than Rs. 1250 billion in government bonds," he said, "Recently, the general depositors are scared by the statements of some people that the banks are going to fail. However, there is no problem in any bank as the banks have more than 28 per cent of liquid assets against the deposits on an average. This makes the banks strong and safe."

Apart from this, deposits up to Rs. 500,000 are being insured.

According to KC, often, the banks reache a state of failure due to the shortage of liquidity but there is not such situation in the banking sector of Nepal. As of now, more than Rs. 400 billion investable funds are accumulated in the banking system while banks have 28 per cent of net liquid assets.

In addition, he said that the average Credit to Deposit ratio of some banks is 80 per cent.

He said that not only the CD ratio and liquid assets, but also the net non-performing loans of Nepal's banks are only about 1.5 per cent. Compared to other South Asian countries, non-performing loans are less in Nepal.

"When bad loans increase, banks are setting aside provisions for loan losses. Now the banks have provisioned about Rs. 218 billion for it," he said while adding, "There is a situation where some people are raising their voice from the streets that they should not repay the loan taken from the bank. It will affect the entire economy."

Upendra Paudyal, Chairman Chairman of Confederation of Banks and Financial Institutions Nepal (CIBFIN) and Nabil Bank, said that it is not appropriate that some individuals and groups continue to attack banking sector which is one of the most transparent businesses in the country.

He said that those who attack the banking sector should be prosecuted. "Such rumors have brought down the morale of the businesses and other stakeholders," he said.

Dr. Gunakar Bhatta, Executive Director of Nepal Rastra Bank was of the opinion that since banking is a sensitive sector, no one should attack the system on a personal basis.

"If there is a problem in the banking sector, the entire economy will be negatively affected," he said.

 Published in The Rising Nepal daily on 25 February 2024.