Given the global financial crisis affecting Cambodia’s economy such as garment industry, tourism sector, construction and real estate, but the Cambodia’s banking sector is still inevitably hit by the crisis. Therefore, it is a cause for increasing in non-performing loans because the commercial banks’ borrowers have hard time to pay back loans while their business is difficult. In addition, that’s a second-round affect that the National bank is worried about.

National Bank of Cambodia Director General Tal Nay Im gave speech at the Cambodian Club of Journalism that non-performing loans at the commercial banks reached 5.2 percent by the end of May, 2009, up 1.8 percentage points from the beginning of the year. She warned the rate could reach as high as 10 percent by the end of the year.

Bad loan was on rise when bank’s borrowers struggled with repayments amid declining cash flow following the World economic recession.

Tal Nay Im said that the Central Bank was not overly worried by the defaults.

According to the National Bank of Cambodia’s 2008 annual banking supervision report, the bad loans in 24 commercial banks was up to 3.7 percent of total outstanding loans, about US$2.4 billion, at the end of the last year, up from 3.4 percent the year before.

15 of 24 commercial banks had no non-performing loans as of the end of 2008, a situation described by some people in the sector as unlikely. And another four had NPLs ratios under 4 percent, according to the report.

The total value of loans soared 54.7 percent from US$1.51 billion to $2.35 billion. The absolute value of NPLs decreased to US$87.44 million at the end of 2008 from $52.95 million a year earlier.

The VOA reported, the Foreign Trade Bank’s bad loan rate went from 30.7 percent to 32 percent in 2008. Canadia bank rose from 6.8 percent to 11.1 percent in that period. By the way, ANZ Royal bank saw an increase from 0.4 percent to 2.6 percent in that period.

In the mean time, the International Monetary Fund (IMF) and the World Bank also warned of rising rates of non-performing loans in the major banks in Cambodia.

“Last year, some banks had zero NPL ratios because they did not have bad loans when we audited them, but since the start of this year all the banks have NPLs,” the Phnom Penh Post quoted Tal Nay Im as saying.

Gui Anvanith, FTB’s managing director, was quoted by the VOA as saying that “Our bank works with big companies, and we have collateral, which has the highest rate of non-performing loans in the country.” He added that “We will continue to be cautions and to strengthen the banking system.”

The Phnom Penh Post quoted In Channy, ACLEDA president as saying that the bank’s NPLs were actually 0.44 percent of outstanding loans at the end of the last year and had increased to 1 percent, largely as a result of loans to large-scale business in the construction-materials sector.

According to the circular on non-performing loans, provisions and interest accounting, commercial banks must apply the following regulation for non-performing loans and interest accounting. The Central Bank issued Prakas B7.02-145 from June 7, 2002 on classification and provisioning for bad and doubtful debt specifies the minimum mandatory level of specific provisioning depending on the classification concerned.

The non-performing loans must be classified in three categories according to the late payment, including substandard (10%), doubtful (30%) and loss (100%).

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