KATHMANDU, March 10: The profits of commercial banks in Nepal increased nominally by 1.6 percent in the first seven months of the current fiscal year, mainly due to the decline in businesses and soaring non-performing loans amid ongoing economic slowdown.
According to Nepal Rastra Bank (NRB), commercial banks earned net profits of Rs 36.06 billion in the first seven months of the current fiscal year, which is an increase of Rs 570 million compared to the same period of last fiscal year when banks recorded profits worth Rs 35.49 billion.
Out of 20 commercial banks, nine were able to increase their profits in the first seven months of the current FY compared to the same period of the last FY. In the review period, Nepal Bank Limited was successful in increasing its profits by a whopping 156.31 percent, from Rs 956.17 million to Rs 2.45 billion.
In terms of monetary value, Nabil Bank records the largest amount of profit. The bank was able to increase its profits to Rs 4.01 billion from Rs 3.98 billion.
On the other hand, 11 commercial banks had their profits declined in the review period. Profits of NIC Asia Bank shrunk by 78.31 percent, the largest of all. As of mid-February this year, the bank earned net profit of Rs 464.7 million, down from Rs 2.14 billion in the same period in FY 2023/24.
The state-owned Rastriya Banijya Bank witnessed a decline in its profit by 53.83 percent to Rs 1.23 billion. Agriculture Development Bank also had its profits drop by 49.16 percent, which was followed by Siddhartha Bank with a downfall of 39.7 percent, Kumari Bank with 34.16 percent and Himalayan Bank with a decline in its profit by 19.86 percent.
According to bankers, the net profits of the commercial banks declined after the NRB tightened the noose on financial audit reports of the banks. With the guidance of the International Monetary Fund, the central bank has adopted a stern policy on provisioning by the commercial banks against their unrecovered loans.
As the banks struggle in their loan recovery, the non-performing loan (NPL) of the commercial banks has soared to as high as 6.96 percent. Their average NPLs stand at 4.33 percent.
Meanwhile, the banks and financial institutions (BFIs) secured net profits totaling Rs 39.79 billion in the review period. The amount includes profits of Rs 3.44 billion earned by development banks and Rs 284 million by finance companies.