KATHMANDU, Dec 12: Net profits of banks and financial institutions (BFIs) declined by 14.71 percent in the first four months of the current fiscal year.
Records from Nepal Rastra Bank (NRB) show that BFIs across three categories—commercial banks, development banks, and finance companies—earned net profits of Rs 21.31 billion between mid-July and mid-November. Excluding microfinance institutions, BFIs had secured net profits of Rs 24.99 billion during the same period last year.
Bankers attribute the decline in BFI earnings to sluggish banking business amid the ongoing economic slowdown and the impacts of the Gen-Z movement and related violence. Additionally, interest income has fallen due to a sharp drop in loan interest rates.
During the review period, net profits of 20 commercial banks alone fell by 13.11 percent, generating Rs 19.37 billion, down from Rs 22.29 billion.
Earnings of four commercial banks increased during the period. Rastriya Banijya Bank’s profits surged 105.23 percent, while Sanima Bank, Global IME Bank, and Everest Bank saw net profit rises of 19.65 percent, 18.91 percent, and 0.27 percent, respectively.
In terms of volume, Global IME Bank led with earnings of Rs 2.51 billion, followed by Nabil Bank with Rs 2.46 billion. Conversely, 16 commercial banks reported declines in profits ranging from 0.75 percent to 132.90 percent.
Among development banks, Garima Bikas Bank posted net profits of Rs 397.7 million, Muktinath Bikas Bank Rs 384.2 million, and Shine Resunga Rs 302.5 million. In the finance company segment, Goodwill Finance earned Rs 52.8 million, ICFC Rs 40.8 million, and Manjushree Finance Rs 23.5 million.
Meanwhile, loan interest rates of BFIs have decreased significantly as of mid-November. According to the NRB, the weighted average interest rate of commercial banks fell to 7.38 percent, with the base rate dropping to 5.41 percent.
BFIs are reported to hold excessive loanable funds exceeding Rs 1.1 trillion, causing the credit-to-deposit ratio to fall to 74.12 percent, well below the NRB’s upper threshold of 90 percent.
The weighted average interest rate of commercial banks has reached a three-year low, compared with 9.44 percent in February 2021. Similarly, the base rate has fallen to below 7.5 percent from 13.03 percent during the same period.
Alongside the base rate, BFIs have also reduced their premium rates significantly. Compared to a previous premium rate of up to 5 percent charged to clients, it now stands at around 1.5 percent, according to the NRB.