Kathmandu. As credit flow slows down and non-performing loans increase, the income of banks is under pressure and operating expenses are also increasing continuously. As salaries and administrative expenses expand, the challenge of banks to effectively control costs is deepening. <\/p>\n
The income side is under pressure due to the slowdown in credit flow in the banking sector and the rise in non-performing loans. At the same time, the expenditure structure is expanding in reverse, the data showed. <\/p>\n
Current fiscal year 2082. Banks and financial institutions (BFIs) have spent Rs 64.43 billion on salary and office management headings as of mid-January 2018. This was spent in the last fiscal year 2081. This is an increase of Rs 2.63 billion compared to the same period of 2018. <\/p>\n
This trend shows that corporate cost control is not effective even as income is declining. This has raised questions about the operational efficiency of the banks. <\/p>\n
The data from the Rastra Bank shows that the main burden of spending growth is concentrated on commercial banks. The 20 commercial banks alone have spent a total of Rs 56.07 billion. That’s a big part of the overall expenses. <\/p>\n
However, such spending growth does not appear to be sustainable in the long term, given the low interest income due to weak credit expansion and the increase in provisioning costs due to the increase in non-performing loans. Banks seem to be struggling to strike a balance between digital transformation, branch expansion and staff structure management, but the current pace of spending shows that cost optimization is still not a priority. <\/p>\n
The same trend is seen in the case of development banks and finance companies. Development banks spent Rs 6.64 billion while finance companies spent Rs 1.71 billion. Both sectors have seen significant growth compared to the previous year. <\/p>\n
Since the income base of these small-sized institutions is limited, the impact of the increase in expenses can be even more severe. Especially in finance companies, the ratio of salaries to administrative expenses is high, which puts direct pressure on profits. <\/p>\n
Overall, the banking sector is now under the double pressure of ‘low credit growth-high cost structure’. Unless credit expansion improves and bad loans are brought under control, such spending increases will be detrimental to banks’ profitability, capital adequacy, and long-term sustainability. <\/p>\n
Therefore, in the coming days, banks need to readjust their strategy keeping cost reduction, efficiency enhancement and risk management at the center.<\/p>\n","protected":false},"excerpt":{"rendered":"
Kathmandu. As credit flow slows down and non-performing loans increase, the income of banks is under pressure and operating expenses are also increasing continuously. As salaries and administrative expenses expand, the challenge of banks to effectively control costs is deepening. The income side is under pressure due to the slowdown in credit flow in the […]<\/p>\n","protected":false},"author":16,"featured_media":269713,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[45117,45031,45159],"tags":[],"class_list":["post-293312","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bank-finance-en","category-banner-news-en","category-news-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/posts\/293312","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/comments?post=293312"}],"version-history":[{"count":1,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/posts\/293312\/revisions"}],"predecessor-version":[{"id":293313,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/posts\/293312\/revisions\/293313"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/media\/269713"}],"wp:attachment":[{"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/media?parent=293312"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/categories?post=293312"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/english.insurancekhabar.com\/ikbrapi\/wp\/v2\/tags?post=293312"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}