KATHMANDU, July 12: While most of the indicators of the economy are negative due to the COVID pandemic, the profit of the banking sector has increased significantly.

In the first 11 months of the fiscal year 2020/21, 27 commercial banks have managed to make a net profit of Rs 62.36 billion. These banks earned a net profit of Rs 54.35 billion last fiscal year. Bankers expect some increase in profits as reports for the last month of the current fiscal year are yet to come.

During this period, 20 commercial banks have increased their profits while seven have decreased their profits. Bankers say that the banks, which distributed an average of 13 percent dividend last year due to the COVID pandemic, are likely to distribute an average of 20 percent dividend this time. In the COVID pandemic, bankers have said that the increase in profits is a result of transparency and hard work.

Meanwhile, businessmen, who have taken loans from banks, accused the banks of making profit by pushing the borrowers more than they needed even during the difficult times. One businessman complained that it was not fair for banks to make huge profits while many entrepreneurs are exiting the industries due to the pandemic. "But in such a situation, the banks have not been able to give discounts and concessions to entrepreneurs as per the profits they have earned," he said.

Anil Sharma, Chief Executive Officer at the Nepal Bankers’ Association, said transparency is the main reason behind the increase in banks' profits. "At the moment, some people think that all sectors are in trouble," he said. "The pandemic has not had a negative impact in all sectors. The reality is that the situation in a small area has deteriorated and most of the corporate sector has done well." 

Sharma added that the banks were able to perform well because the corporate sector had also performed well even during the pandemic.

Economist Nara Bahadur Thapa attributes  better international trade for the increase in profits even during the pandemic. "Also, the banks have been able to increase their profits due to the policy taken by the Nepal Rastra Bank (NRB) and increased inflow of remittance. Some businesses also flourished during the pandemic," he said.

The NRB had started the refinancing scheme last year after the COVID-19 pandemic affected industries and businesses. An average of Rs 135 billion has been disbursed in the last one year.

Although many had similarly predicted a sharp decline in remittances when the outbreak of the COVID-19 pandemic began in March last year, the actual inflow of remittance has been increasing every month. A total of Rs 875 billion remittance was received in the last fiscal year, whereas Rs 809 billion has been received in the first ten months of the current fiscal year.

Thapa, who is also a former executive director of NRB, said that increasing the flow of credit by banks during the pandemic will help to achieve financial stability. "It's good to have financial stability during the pandemic," he said. “Not all sectors have sustained loss except banks. There are also examples of some doing better than before.”

The credit flow of banks has increased by 23 percent in the current fiscal year, according to NRB data. Bankers say that the increase in profit of banks is natural due to the increase in credit flow. Thapa said that the flow of credit should be considered as a service to strengthen the economy.

 
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