Kathmandu. Prime Commercial Bank has been found to be giving loans beyond the provisions set by Nepal Rastra Bank.

Chief Executive Officer (CEO) of the bank, Sanjeev Manandhar, has said that the bank has started giving loans outside the provisions set by the Nepal Rastra Bank. The Nepal Rastra Bank (NRB) has also taken action against CEO Manandhar for giving loans arbitrarily.

During the inspection, it was found that the bank did not classify the loans on the basis of the period of expiry of the loan and did not maintain the loan loss provision on the basis of the loan outstanding period. Not only this, the bank has not calculated the risk weight of the loans as per the Capital Education Freshwork 2015 issued by the Nepal Rastra Bank.

Integrated Directive 2081 Direction No. Point No. 2-081. Certain loans pursuant to 1(b) have not been classified on the basis of the period of expiry of the loan term. Clause 1 (b) provides for non-performing loans. Bad loans should be categorized for a period of ÷3 to 6 months, 6 to 1 year if they are doubtful loans, and bad loans for a period of more than 1 year. The CEO has been found to have ignored this provision.

Point No. Subpoint No. 9 (1) There is a provision that the credit loss provision has to be maintained on the basis of the outstanding period of the credit for certain credits. Point 9 of the directive has a provision to maintain the loan for loss.

The minimum loan loss provision should be 1.10 percent, 5 percent for micro-monitoring, 25 percent for substandard credit, 50 percent for suspicious loans and 100 percent for bad loans.

As of mid-October, the bank’s bad loans stood at 5.86 percent. It was 4.86 percent in the same period last year. The bank’s bad loans are increasing. With the increase in bad loans, the amount that banks have set aside for potential risk management has also increased. The bank has set aside Rs 48.09 crore for risk till mid-October. This amount is 17.18 percent more than the same period last year. Such amount was Rs 410.45 million in the same period of the previous year.

The Rastra Bank (NRB) has warned the bank as per Section 100 (2) (a) of the Rastra Bank Act, 2058 BS for not complying with these provisions.