The quiet rise in restructured loans
Banks call them 'relief'. The borrowers call them the only reason the shop is still open. Both are right, which is the problem.
By Nisha Karki · Markets desk
A restructured loan keeps a borrower's shop open by moving the payment later. It is not the same as a default — nothing is written off, and the default rate stays splendidly flat — but it is not the same as a healthy loan either, and the two are increasingly not the same population.
We took twelve banks' quarterly disclosures for the past ten quarters and recomputed the ratio from their own tables. The stock of restructured loans has risen every quarter for two years while reported non-performing loans have fallen. Both numbers are on the page; only one is doing the reassuring.
The borrowers we met did not use the word 'restructure'. They described extending a tenure, skipping the quarter the school fees fall due, and a third visit by the bank officer who used to come twice a year. The bank reports all three events as 'relief measures adopted'. That is accurate. It is not neutral.
The central bank does not publish the restructured stock in its main release — it is a schedule in a quarterly annex, table six. We will keep charting table six. If the annex ever stops appearing, that will be the note.
Of total lending
4.8%
Up from 2.9% two years ago. Formula: restructured stock ÷ end-of-quarter total loans, twelve bank sample.
“Nothing is written off, and the default rate stays splendidly flat — but it is not the same population.”
Corrections run in place, with the figure re-checked
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