The rising non-performing loans (NPLs) of commercial banks have significantly impacted their net profits in the first half of the current fiscal year.
According to financial reports released by the banks, the average NPL ratio rose to 4.33 percent, up from 3.66 percent at the end of the previous fiscal year, marking an increase of 0.67 percentage points.
Among individual banks, Kumari Bank saw its NPLs surge to 6.96 percent, compared to 4.97 percent a year earlier. Out of 20 commercial banks, 14 reported NPLs exceeding 4 percent.
Bankers attributed the rising NPL ratio to growing bad debts. “The primary challenges in loan recovery stem from delays in government payments to contractors and small and medium enterprises failing to meet their loan obligations,” a banker explained.
During this period, banks faced a liquidity surge while grappling with a rise in bad debts, exacerbated by the country’s ongoing economic slowdown. The net interest earnings of banks also suffered, declining by 3.71 percent due to weaker business performance and reduced returns on government bonds.
State-owned Rastriya Banijya Bank experienced the steepest decline in net interest earnings, dropping 22.99 percent. Agriculture Development Bank followed with a 22.36 percent decline, and Standard Chartered Bank Nepal reported a 17.44 percent fall.
As a result, the overall profit of the 20 commercial banks decreased by 4.36 percent in the second quarter of the current fiscal year compared to the same period in FY 2023/24, falling from Rs 28.68 billion to Rs 27.43 billion.
Of the 20 banks, nine reported a decline in profits, while 11 managed to increase theirs. Nabil Bank recorded the highest profit at Rs 3.24 billion, a 1.29 percent increase. Global IME Bank posted the second-highest profit, growing by 49.51 percent to Rs 3.5 billion, while Nepal Investment Mega Bank saw a 57 percent profit surge to Rs 2.83 billion.
In contrast, NIC Asia Bank reported the sharpest decline in profit, dropping by 92.03 percent, followed by Kumari Bank, which saw its profit fall by 68.21 percent.
The rising non-performing loans (NPLs) of commercial banks have significantly impacted their net profits in the first half of the current fiscal year.
According to financial reports released by the banks, the average NPL ratio rose to 4.33 percent, up from 3.66 percent at the end of the previous fiscal year, marking an increase of 0.67 percentage points.
Among individual banks, Kumari Bank saw its NPLs surge to 6.96 percent, compared to 4.97 percent a year earlier. Out of 20 commercial banks, 14 reported NPLs exceeding 4 percent.
Bankers attributed the rising NPL ratio to growing bad debts. “The primary challenges in loan recovery stem from delays in government payments to contractors and small and medium enterprises failing to meet their loan obligations,” a banker explained.
During this period, banks faced a liquidity surge while grappling with a rise in bad debts, exacerbated by the country’s ongoing economic slowdown. The net interest earnings of banks also suffered, declining by 3.71 percent due to weaker business performance and reduced returns on government bonds.
State-owned Rastriya Banijya Bank experienced the steepest decline in net interest earnings, dropping 22.99 percent. Agriculture Development Bank followed with a 22.36 percent decline, and Standard Chartered Bank Nepal reported a 17.44 percent fall.
As a result, the overall profit of the 20 commercial banks decreased by 4.36 percent in the second quarter of the current fiscal year compared to the same period in FY 2023/24, falling from Rs 28.68 billion to Rs 27.43 billion.
Of the 20 banks, nine reported a decline in profits, while 11 managed to increase theirs. Nabil Bank recorded the highest profit at Rs 3.24 billion, a 1.29 percent increase. Global IME Bank posted the second-highest profit, growing by 49.51 percent to Rs 3.5 billion, while Nepal Investment Mega Bank saw a 57 percent profit surge to Rs 2.83 billion.
In contrast, NIC Asia Bank reported the sharpest decline in profit, dropping by 92.03 percent, followed by Kumari Bank, which saw its profit fall by 68.21 percent.
