The nation's commercial banks will have to cut their bad-loan ratios to below 7 percent by the end of this year or face punishment, the finance ministry said yesterday.
Under the reform program proposed by the ministry, the banks would have to lower their non-performing loan (NPL) ratios even further to below five percent by the end of the following year.
"The requirements were consensus reached by a Cabinet-led financial reform task force. The ministry has submitted a proposal on the NPL ratio reduction to the Cabinet for approval," a finance ministry official said.
"We expect the Cabinet will soon issue the green light soon," she said.
Banks which fail to meet the 7 percent requirement by the end of this year would face restrictions on salary and bonus payments to their boards of directors, the official said.
And banks that cannot meet the five percent deadline would be forced to close between three to five percent of their total branches, she added without giving further details.
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