The net profits of commercial banks declined 13.37 percent in the first eight months of the current fiscal year, thanks to the economic slowdown and an increase in the bad debts of the banks.
The records with Nepal Rastra Bank (NRB) show that the country’s ‘A’ class financial institutions earned profits of Rs 42.30 billion during mid-July 2023 and mid-March 2024. In the same period last year, the banks earned profits of Rs 48.83 billion in total.
According to bankers, banks suffered due to an increasing provisioning they need to maintain with soaring bad debts. “In addition, their profits have also been affected by a decline in interest earnings of late,” said a banker.
With a fall in aggregate demand in the economy, the banks have been unable to increase their lending, while they struggle to recover loans they issued to their customers. During the review period, the credit-deposit ratio fell below 80 percent against the central bank’s prescribed limit of 90 percent.
After the banks were stocked with excess liquidity, they have also reduced their lending rates in the past few months. As of last week, the total deposit collection of commercial banks stood at Rs 5.394 trillion, while they issued loans of Rs 4.501 trillion, show the records of the NRB. This shows that the banks are having excessive loanable funds of more than Rs 800 billion.
Through its monetary policy, the NRB estimated to increase the private sector lending of banks by 11.5 percent (around Rs 561 billion) in the current fiscal year. However, the banks have lent only Rs 200 billion in the first eight months.
In the review period, five out of 20 commercial banks were successful in increasing their profits. The profits of Agricultural Development Bank grew multifold to Rs 1.97 billion. Likewise, Prime Commercial Bank had its profits increase by 20.74 percent, Himalayan Bank by 9.21 percent, Siddhartha Bank by 9.12 percent and Everest Bank was able to increase its profits by 2.63 percent.
On the other hand, profits of Nepal Bank Limited declined 39.33 percent, the highest of all. Likewise, Nepal SBI Bank witnessed its profits fall by 38.67 percent, NIC Asia Bank by 37.35 percent, Prabhu Bank by 31.84 percent and Kumari Bank’s profits declined 30.89 percent.
Regarding the net value, Nabil Bank led in terms of profit earnings. The bank earned Rs 4.72 billion during the review period. Global IME Bank earned profits of Rs 3.43 billion. Nepal SBI Bank, with earning profits of Rs 1 billion, was the lowest among all.
