Ncell profit repa­tri­a­tion to hit banks in Nepal

The Pak Banker - - FRONT PAGE - -AFP

KATH­MANDU: Fol­low­ing the Supreme Court's clear­ance to repa­tri­ate the prof­its earned by the telecom­mu­ni­ca­tion ser­vice provider Ncell, Nepali banks in which the com­pany has de­posited funds have raised the in­ter­est rate on fixed de­posits and other de­posit schemes to main­tain the credit to core cap­i­tal cum de­posit (CCD) ra­tio.

Due to lack of de­posits, banks were al­ready not in a po­si­tion to dis­burse or com­mit to big loan amounts as the banks have al­ready is­sued loans up to the per­mis­si­ble CCD level. Av­er­age CCD ra­tio of the 28 com­mer­cial banks in op­er­a­tion is 77 per cent and if the fig­ure of gov­ern­ment-owned Ras­triya Bani­jya Bank (RBB) is re­moved from that cal­cu­la­tion, the av­er­age CCD level of the bank­ing in­dus­try will stand at around 79 per cent. This means banks have al­ready lent to the op­ti­mum level and if a sig­nif­i­cant amount is with­drawn from the con­cerned banks, the CCD level will eas­ily cross the per­mis­si­ble 80 per cent.

"Banks were al­ready de­fer­ring loan dis­burse­ment sched­ule even for the al­ready com­mit­ted loans keep­ing in mind the in­come tax (40 per cent of the an­nual tax amount) sub­mis­sion dead­line of mid-Jan­uary. So, Ncell's profit repa­tri­a­tion will cer­tainly choke the banks," said Bhu­van Ku­mar Da­hal, CEO of San­ima Bank. Bankers say that around Rs 35 bil­lion to Rs 40 bil­lion will be with­drawn from the bank­ing sys­tem for fil­ing in­come tax re­turns by mid-Jan­uary. Ap­pre­hen­sive about this sit­u­a­tion, bankers to­day met with high-rank­ing of­fi­cials of Nepal Ras­tra Bank and urged for a stim­u­lus from the cen­tral bank like re­fi­nanc­ing pack­ages to ful­fil the de­mand of credit in the econ­omy. On the other hand, in­come of the banks will be hit hard as their in­ter­est-in­come will go down as they are not able to ex­pand loans.

"The gov­ern­ment col­lects the rev­enue and lit­er­ally does noth­ing with it. In­stead of just sit­ting on top of the col­lected amount, which has been the case for past cou­ple of years, Min­istry of Fi­nance could al­low NRB to de­posit the funds al­lo­cated for the lo­cal level gov­ern­ment and re­con­struc­tion fund to the com­mer­cial banks as a short-term rem­edy," opined Da­hal.

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