KATHMANDU, MAY 29, 2012
The banking sector is worried that recently rejuvenated investor interest will dissipate as the Constitution Assembly (CA) is dead.
Bankers said the banking sector, which has been struggling to extricate itself out of a mess marked by degrading assets, increasing non-performing loans and a credit crunch, will get deeper into trouble as a prolonged political transition will damage the investment climate. The uncertainty which was prevailing in the country for the last four years is now likely to continue for at least a couple of years more.
Commercial banks in the country have around Rs 50 billion ready for investment. Bankers said this amount would remain with them as investors will be unwilling to start new ventures following the dissolution of the CA. Banks will be in double trouble as they have to pay interest on the deposits received from the general public but they cannot earn a good rate of interest on the loans they issue. Bankers said that the growth in deposits which has been impressive in the last six months will take a hit if uncertainty persists for a long time.
“I am still unable to assess the current situation. This is not a scenario we had been expecting,” said Ajay Shrestha, chief executive officer of the Bank of Kathmandu. “In my opinion, this situation will slow down economic growth as the confidence of the private sector, the engine of growth, is low,” said Shrestha.
Bankers are worried that their clients who were showing interest in borrowing capital may postpone their plans. “We had a few prospective clients in regular contact with us willing to invest in long-term projects like hydroelectricity and manufacturing enterprises expecting that the country will get a new constitution and it will head towards stability,” said Bhuvan Dahal, chief investment officer at Nabil Bank. “Under the current circumstances, it is very likely that they will postpone their investment decisions and we will miss an opportunity to make much needed investments.”
NIC Bank CEO Sashin Joshi said that uncertainty and a fluid situation was not conducive for investment, and that it would further harm the performance of the banking industry. Joshi, however, welcomed the government’s decision to hold new elections stating that, in a way, going for a fresh mandate was always positive.
“At least, it has cleared some uncertainty about where the country is heading towards,” said Joshi. “But there has been statements of protest regarding the government’s decision, and if they develop into strikes and lockouts, it will be difficult for the banks even to carry out routine operations.”
Shrestha also feared that if the protests spill over on to the streets, their impact will be very negative on the health of banks. Most bankers said that if the political debates and differences didn’t change into street protests, strikes and lockouts and law and order was maintained, their regular business would not be affected.
Source: The Kathmandu Post
The banking sector is worried that recently rejuvenated investor interest will dissipate as the Constitution Assembly (CA) is dead.
Bankers said the banking sector, which has been struggling to extricate itself out of a mess marked by degrading assets, increasing non-performing loans and a credit crunch, will get deeper into trouble as a prolonged political transition will damage the investment climate. The uncertainty which was prevailing in the country for the last four years is now likely to continue for at least a couple of years more.
Commercial banks in the country have around Rs 50 billion ready for investment. Bankers said this amount would remain with them as investors will be unwilling to start new ventures following the dissolution of the CA. Banks will be in double trouble as they have to pay interest on the deposits received from the general public but they cannot earn a good rate of interest on the loans they issue. Bankers said that the growth in deposits which has been impressive in the last six months will take a hit if uncertainty persists for a long time.
“I am still unable to assess the current situation. This is not a scenario we had been expecting,” said Ajay Shrestha, chief executive officer of the Bank of Kathmandu. “In my opinion, this situation will slow down economic growth as the confidence of the private sector, the engine of growth, is low,” said Shrestha.
Bankers are worried that their clients who were showing interest in borrowing capital may postpone their plans. “We had a few prospective clients in regular contact with us willing to invest in long-term projects like hydroelectricity and manufacturing enterprises expecting that the country will get a new constitution and it will head towards stability,” said Bhuvan Dahal, chief investment officer at Nabil Bank. “Under the current circumstances, it is very likely that they will postpone their investment decisions and we will miss an opportunity to make much needed investments.”
NIC Bank CEO Sashin Joshi said that uncertainty and a fluid situation was not conducive for investment, and that it would further harm the performance of the banking industry. Joshi, however, welcomed the government’s decision to hold new elections stating that, in a way, going for a fresh mandate was always positive.
“At least, it has cleared some uncertainty about where the country is heading towards,” said Joshi. “But there has been statements of protest regarding the government’s decision, and if they develop into strikes and lockouts, it will be difficult for the banks even to carry out routine operations.”
Shrestha also feared that if the protests spill over on to the streets, their impact will be very negative on the health of banks. Most bankers said that if the political debates and differences didn’t change into street protests, strikes and lockouts and law and order was maintained, their regular business would not be affected.
Source: The Kathmandu Post
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