Banks have to make provision around Rs 50 billion, What is the net profit of Banks when auctioning collateral ?

Jun Tue 2022 04:37:36

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Banks have to make provision around Rs 50 billion, What is the net profit of Banks when auctioning collateral ?

Kathmandu. Commercial banks are expected to make a provision of Rs 50 billion in the fourth quarter of the current fiscal year. Banks that made a provision of Rs 54.5 billion in the third quarter of the current fiscal year will have to make the same provision in the fourth quarter as well. Banks facing liquidity crunch have not been able to grow their business significantly. Bankers say that the financial statements of the banks for the fourth quarter are similar to those for the second and third quarters. He argues that the profits of the banks will not increase much due to the need to make provision along with the business expansion.

Therefore, the financial statements of the fourth quarter are not likely to change much from the previous quarter. The chief executive officers (CEOs) of various commercial banks are of the view that the provision of Rs 50 billion may have to be made in the fourth quarter as well. According to him, the statistics so far show the same.

According to the agreement, if the borrower does not pay the interest on time, the banks will have to put the loan in bad loan. Banks and financial institutions have to make provision for loan loss specified by NRB. Of the loans disbursed by the banks, the loan of less than one year has to be treated as bad loan. Banks and financial institutions have to provide 100% provision for bad loans. Even if the banks increase their profits as they have to make 100 percent provision for bad loans, it seems that the profit will be less due to the provision.

Commercial banks have made a profit of Rs 58.33 billion in the first ten months of the current fiscal year. Commercial banks had made a profit of Rs 51.01 billion in April. According to the banks, business has not increased much in June and July. Due to that, the bankers are of the opinion that they have to make profit and provision in mid-April.