Peoples Bank provided a massive Rs. 1.7 bn for its property portfolio to comply in advance with a new Central Bank ruling.
Provisions for bad debts by banks are made after deducting the value of the collateral for the loan.rn
rnUnder the new mandatory haircuts announced by the regulator, banks will only be allowed to setoff a part of the collateral value.rn
rnFurther cuts on the collateral value backing NPLs will have to be made as the debt becomes older.rn
rnStarting this year commercial banks will be forced to provide a 40 per cent provision on collateral provided for non-performing debts that are over a year old.rn
rnPeoples Bank made the extra provisions a year before they actually took effect.rn
rnAnalysts say not being under pressure to show earnings growth has helped rn
rnPeoples Bank make generous provisions for bad debts of over Rs. 2 bn.rn
rnHowever, the bank says they urgently need capital to plug a Rs. 12 bn shortfall in the balance sheet.
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rnldblquote We seem to run fast b