Soured loans incurred by the Philippine banking system rose by 35.01 percent in the first eight months of the year, according to the Bangko Sentral ng Pilipinas (BSP).
Preliminary data from the central bank showed on Thursday that lenders’ gross nonperforming loans (NPL) soared to P305 billion in January to August from P225.90 billion in the same period last year.
NPLs are past due loans where the principal or interest is unpaid for 30 days or more after the due date. This includes the outstanding balance of loans payable in monthly installments when three or more installments are in arrears.
Data also showed that banks’ total loan portfolio jumped by 4.73 percent to P10.74 trillion at end-August from P10.29 trillion year-on-year, translating to a gross NPL ratio of 2.84 percent, higher than the year-earlier 2.19 percent.
This ratio is the share of bad loans to total loans, inclusive of interbank loans.
The central bank earlier said the NPL ratio was estimated to double from 2.4 percent at end-March to 4.6 percent by the end of 2020.
This is based on a baseline survey of banks and the impact of the coronavirus disease 2019 (Covid-19) pandemic on their operations.
To maintain a manageable NPL ratio, the BSP is pushing for the passage of the proposed
Financial Institutions Strategic Transfer (FIST) Act.
FIST aims to encourage financial institutions to sell their nonperforming assets (NPAs) to asset management companies that specializes in resolving distressed assets by providing fiscal incentives.
These include exemption from documentary stamp tax, capital gains tax, creditable withholding tax and value-added tax or gross receipts tax.
Bangko Sentral Governor Benjamin Diokno had said the central bank recognized the objectives of the measure to help financial institutions in their bad-debt resolution and NPA management in response to the pandemic’s impact.
The “BSP supports the laudable objectives of [the] FIST bill to induce economic activity and improve the liquidity of the financial system, enabling FIs (financial institutions) to respond to the looming increase in NPAs and, therefore, propel economic growth,” Diokno said.