KATHMANDU, Aug 17: Despite achieving an impressive growth in net profit earnings in the last fiscal year (FY), majority of commercial banks witnessed a surge in their non-performing loans (NPLs) due to their failure to recover bad debts.
According to the unaudited reports unveiled by the banks, the average NPL of the banks stood at 4.22 percent in mid-July 2025, up from 3.73 percent a year ago. Out of the 20 commercial banks, the bad debts of 13 commercial banks increased, while only seven were successful in reducing their bad debt ratios.
Likewise, the NPLs of five banks were above 5 percent, six had maintained between 4-5 percent and the remaining nine banks had their NPLs below 3 percent. Only Everest Bank had a bad loan ratio of less than one percent in the review period. NPL of Everest Bank was only 0.38 percent, while this figure for Standard Chartered Bank was 1.47 percent.
Himalayan Bank had the highest NPL of 7.28 percent, followed by Kumari Bank and NIC Asia Bank with 6.42 percent and 6.28 percent, respectively.
Lending slows as banks focus on recovery of loans at fiscal yea...
The state-owned Rastriya Banijya Bank and Agriculture Development Bank were also successful in reducing their NPLs. The performance of Nabil Bank, Laxmi Sunrise Bank and Machhapuchchhre Bank under the heading improved marginally.
Despite a rise in average bad debts, banks breathed a sigh of relief as their provisioning requirements fell. Supported by a slight improvement in loan recovery and Nepal Rastra Bank’s (NRB) soft measures under the monetary policy, banks’ loan loss provisions dropped to around Rs 28.50 billion at the end of the last fiscal year. In contrast, they had maintained Rs 55.98 billion in non-performing assets in the previous year.
The NRB’s soft policy has resulted in a notable increase of 43 percent in the banks’ profits. As per the unaudited reports of the commercial banks, their cumulative profits increased to Rs 71.22 billion, up from Rs 49.77 billion in the review period.
With a growth of 15 percent, Nabil Bank secured the largest profit of Rs 7.12 billion. It was followed by Nepal Investment Mega Bank with a profit of Rs 6.57 billion and Global IME Bank with Rs 6.20 billion.
Meanwhile, the total distributable profit of the commercial banks stands at Rs 21.63 billion. On an average, banks are able to provide 13.29 percent dividends to their shareholders.
According to bankers, the NRB’s decision to reduce the mandatory regulatory reserve to 51 percent from 61 percent enabled the banks to increase their distributable profits. “With the provision in place, banks have been able to use an additional Rs 14.50 billion to provide dividends to their shareholders,” said a banker.
