Nepali commercial banks significantly increased their loan issuance last month, providing Rs 22.74 billion in lending between mid-February and mid-March. According to the Nepal Bankers’ Association (NBA), a total of 20 commercial banks extended additional loans worth Rs 279.68 billion in the first eight months of the current fiscal year. This surge pushed the banks’ total loan portfolio to Rs 4.85 trillion as of mid-March, up from Rs 4.57 trillion in mid-July 2024.
Bankers attributed this increase to higher lending for imports and margin loans. Notably, significant investments were made in importing raw materials for edible oil production, which has become a key export contributor for Nepal.
Loan issuance has picked up momentum over the past four months, despite a Rs 2 billion decline in mid-October and mid-November. Lending saw a sharp rise of Rs 42 billion, Rs 94 billion, and Rs 12 billion in the three consecutive months that followed. Among the banks, Global IME Bank led the way with a 10 percent rise in its lending portfolio, reaching Rs 429.83 billion. In contrast, NIC Asia Bank experienced a decline of Rs 35.43 billion in its loan issuance.
On the deposit side, commercial banks collected over Rs 6.03 trillion as of mid-March, with an additional Rs 282.27 billion added in the review period. Last month alone, deposits increased by Rs 39.99 billion. Nepal Investment Mega Bank led in deposit growth, adding Rs 45.84 billion (11.36 percent), raising its total deposits to Rs 309.98 billion. Meanwhile, NIC Asia Bank saw its deposit base shrink by Rs 61.86 billion to Rs 298.68 billion.
However, despite the positive lending trend, banks are facing rising non-performing loans (NPLs). As of mid-February, NPLs reached 4.73 percent, up from 3.36 percent in the same period last year, reflecting growing difficulties in loan recovery. This increase has also led to a sharp rise in non-banking assets, which surged by 79.89 percent to Rs 35.82 billion, compared to Rs 19.91 billion a year ago.
While loan issuance and deposit collection show signs of improvement, the rising NPLs pose challenges for Nepal’s banking sector, signaling potential risks in financial stability.
