The profits of commercial banks in Nepal increased nominally by 1.6% in the first seven months of the current fiscal year, as businesses declined and non-performing loans (NPLs) surged due to the ongoing economic slowdown.
According to Nepal Rastra Bank (NRB), commercial banks earned a net profit of Rs 36.06 billion during this period, an increase of Rs 570 million from Rs 35.49 billion recorded in the same period last fiscal year.
Out of 20 commercial banks, only nine managed to increase their profits. Nepal Bank Limited saw the highest profit growth, surging by 156.31% from Rs 956.17 million to Rs 2.45 billion. In terms of monetary value, Nabil Bank recorded the highest profit, increasing slightly from Rs 3.98 billion to Rs 4.01 billion.
Conversely, 11 commercial banks reported a decline in profits. NIC Asia Bank experienced the steepest drop, with profits plummeting by 78.31% to Rs 464.7 million from Rs 2.14 billion. State-owned Rastriya Banijya Bank saw its profits shrink by 53.83% to Rs 1.23 billion, while Agriculture Development Bank suffered a 49.16% decline. Other significant losses were recorded by Siddhartha Bank (-39.7%), Kumari Bank (-34.16%), and Himalayan Bank (-19.86%).
Bankers attribute the decline in net profits to the NRB’s stricter financial audit policies, implemented under the guidance of the International Monetary Fund (IMF). The central bank has enforced stricter provisioning requirements for commercial banks to cover their unrecovered loans, contributing to increased financial strain.
As a result, the NPL ratio of commercial banks has risen significantly, reaching as high as 6.96%, with an average NPL of 4.33%.
Meanwhile, banks and financial institutions (BFIs) collectively secured net profits of Rs 39.79 billion during the review period. This includes Rs 3.44 billion in profits from development banks and Rs 284 million from finance companies.
