Despite recording strong profit growth in the last fiscal year, a majority of Nepal’s commercial banks struggled with an increase in non-performing loans (NPLs), reflecting challenges in recovering bad debts.
According to unaudited financial reports, the average NPL ratio of commercial banks climbed to 4.22% in mid-July 2025, up from 3.73% a year earlier. Out of 20 banks, 13 reported higher bad debts, while only seven successfully reduced their NPLs.
Breakdown of NPLs among commercial banks:
- Five banks had NPLs above 5%.
- Six banks maintained between 4–5%.
- Nine banks reported below 3%.
Among the best performers, Everest Bank maintained the lowest NPL at 0.38%, followed by Standard Chartered Bank at 1.47%. On the other end, Himalayan Bank posted the highest NPL of 7.28%, followed by Kumari Bank (6.42%) and NIC Asia Bank (6.28%).
Meanwhile, state-owned banks—Rastriya Banijya Bank and Agriculture Development Bank—successfully reduced their bad loans. Improvements were also seen in Nabil Bank, Laxmi Sunrise Bank, and Machhapuchchhre Bank.
Profits Buoyed by Softer NRB Policy
Interestingly, despite the rise in NPLs, banks reported stronger profits, aided by Nepal Rastra Bank’s (NRB) soft monetary measures. Loan loss provisions declined to Rs 28.50 billion, down from Rs 55.98 billion in the previous year. This reduction, combined with improved loan recovery, boosted profitability.
Commercial banks collectively recorded a 43% increase in profits, reaching Rs 71.22 billion, compared to Rs 49.77 billion a year earlier.
- Nabil Bank led the profit chart with Rs 7.12 billion (15% growth).
- Nepal Investment Mega Bank followed with Rs 6.57 billion.
- Global IME Bank earned Rs 6.20 billion.
Dividends and Distributable Profits
The total distributable profit of commercial banks stood at Rs 21.63 billion, allowing them to provide an average dividend of 13.29% to shareholders.
Bankers credited NRB’s move to reduce the mandatory regulatory reserve from 61% to 51%, which freed up an additional Rs 14.50 billion for dividend distribution.
