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Sour loans taken out by the Philippine banking system rose to more than P364 billion in the first nine months of the year, according to the Bangko Sentral ng Pilipinas (BSP).
Preliminary central bank data showed on Tuesday that lenders’ gross non-performing loans (NPL) rose to P364.67 billion in January to September 2020, up 60.22 percent from the P227.60 billion in the first nine months of 2019.
Bad loans are past due loans in which the principal or interest is not paid for 30 days or more after the due date. This includes the outstanding balance of loans payable in monthly installments when there are three or more installments in arrears.
The data also showed that the banks’ total loan portfolio was down 0.09 percent to P10.73 trillion at the end of September from P10.74 trillion at the end of August.
It translated into a gross delinquency rate of 3.40 percent, higher than the 2.84 percent a month ago and 2.15 percent the previous year.
This ratio is the ratio of bad loans to total loans, including interbank loans. The latest delinquency rate is the highest in more than seven years or since 3.42 percent in May 2013.
The central bank previously said that the delinquency rate was estimated to double from 2.4 percent at the end of March to 4.6 percent by the end of 2020.
This is based on a benchmark survey of banks and the impact of the 2019 coronavirus disease (Covid-19) pandemic on their operations.
To maintain a manageable NPL ratio, BSP is pushing for the passage of the proposed Financial Institutions Strategic Transfer Law (FIST).
FIST aims to encourage financial institutions to sell their NPAs to asset management companies that specialize in solving distressed assets by providing tax incentives.
These include exemption from documentary stamp tax, capital gains tax, creditable withholding tax, and value added tax or gross income tax.
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