Ncell profit repatriation to hit banks in Nepal
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 This means banks have already lent to the optimum level and if a significant amount is withdrawn from the concerned banks, the CCD level will easily cross the permissible 80 per cent.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 Bankers say that around Rs 35 billion to Rs 40 billion will be withdrawn from the banking system for filing income tax returns by mid-January.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.