Banks to step up loans recovery crackdown as NPLs climb in Q1

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Commercial banks are preparing a sweeping crackdown on defaulters.[File, Standard]

Commercial banks are preparing a sweeping crackdown on defaulters as non-performing loans (NPLs), loans that borrowers have failed to repay for 90 days or more, climbed to 15.6 per cent of gross loans in the first quarter, up from 15.4 per cent three months earlier, a Central Bank of Kenya (CBK) survey shows.

The deterioration in asset quality, a measure of how many loans are at risk of not being repaid, driven by a 3.4 per cent jump in gross NPLs outpacing modest loan growth of 1.9 per cent, has prompted lenders to intensify recovery efforts across nine economic sectors, according to the CBK Credit Officer Survey released last week. The survey, which polled 38 commercial banks and one mortgage finance company, found that 78 per cent of respondents plan to step up credit recovery in the trade sector, which includes retailers, wholesale distributors, importers and hardware shops.

Another 75 per cent will target personal and household loans, typically salary advances, unsecured personal loans, and asset financing for individuals.