Kathmandu. The International Monetary Fund (IMF) has set a condition with the Nepal Rastra Bank and the government to conduct the audit of the large commercial banks of Nepal by a foreign firm. For a long time, the IMF has been accusing Nepal's banks and financial institutions of hiding bad loans by doing evergreening (the work of giving more loans to pay the principal interest of loans taken from banks). Auditing by an independent auditor will reveal the real situation of bad loans of Nepal's banks.

After the audit, the IMF will guide any banks with capital shortfalls on how to return to full compliance with regulatory requirements, the need to submit capital management plans and carefully monitor the relevant reclassification of loans. .82 percent and 7.82 percent of finance companies have bad loans.

"Loan recovery has become the biggest challenge for banks this year," bankers say, "If the situation does not improve, businessmen who have been paying installments regularly so far may not pay in the coming months." If such a situation occurs, the situation will be dire.''Nepal has taken 'Extended Credit Facility' or CF from the Monetary Fund to make structural reforms to maintain external stability by eliminating current account deficit. Mudra Kosh is currently operating other programs with various conditions.

Funds are available in installments under the same program. If the accounts of 10 banks are not audited, the next installment that Nepal will receive will be stopped and the currency fund will also leave Nepal. Article-Four Mission has set a condition to study Nepali banks through a trusted foreign firm after coming to Nepal and studying them.

Monitoring and auditing of Nepali banks has been done by three separate bodies. First, it is done by the internal auditor of the concerned bank, secondly by the external auditor and thirdly, the National Bank also does it through on-site monitoring. In spite of this, the experts understand that asking a foreign organization to audit 10 big banks is a sign of distrust of the Monetary Fund towards Nepali auditors and regulators.

According to the recommendation of Mudra Fund, Nepal Rastra Bank also conducted its external audit. High officials say that the recent audit did not show any major problems.

However, bad loans of banks have doubled this year compared to last financial year. However, it is half of the maximum limit set by the National Bank. The Fund does not believe this.

The 36-month reform program of the Monetary Fund is currently underway in Nepal. Each time he sets one condition and provides the next installment only after it is fulfilled. Earlier, it was ordered to cancel the margin on import bonds while issuing working capital credit guidelines. After fulfilling both the conditions, the installment was provided. Now for the next tranche, Mudra Fund has asked 10 banks to be audited by foreign firms. Its official decision has already been made.

The Mudra Fund team has completed the study of Nepal. He prepares the report and discusses it in the board of directors and passes it. Then he makes the report public. The report will be made public in about 2 months.

After that, the Minister of Finance and the Governor of Nepal must give a written commitment that they will conduct an audit. After the written commitment, the second installment is paid under the support of Mudra Fund. At that time, it is agreed that an audit can be done 'from 6 months to a year'. If tested within it, another installment will be found.

Mudra Kosh has doubted the credit quality (asset quality) of Nepal's banks. Bad loans have not increased even when most of the loans that went during the Covid period have deteriorated, and banks are issuing 35-day notices in a hurry. Now it is around 2.63 percent. In that case, there is a possibility that Mudra Fund will select 10 largest banks according to the size of the loans and conduct an audit.

According to data up to mid-January, the top 10 banks in terms of loans include Global IME, Nepal Investment Mega, Nabil, Kumari, NIC Asia, Himalayan, Prabhu, National Commercial Bank, NMB and Siddharth Bank.