KATHMANDU, Aug 16: The average non-performing loan (NPL) of 20 commercial banks surged to 5.44 percent, while that of individual banks soars as high as 15.55 percent amid a notable rise in their bad loans.
According to the unaudited financial statements of the commercial banks for the fiscal year 2025/26, the average NPL soared by over 0.84 percent in one year. In 2024/26, the figure stood at 4.6 percent.
The increased NPL in the banking sector indicates that the pressure of bad loans has increased further in Nepal’s banking sector. Amid poor credit expansion, the increase in bad debts further questions about the banks’ capacity on maintaining the credit quality and loans recovery.
Lending slows as banks focus on recovery of loans at fiscal yea...
Meanwhile, a recent study by ICRA Nepal, a credit rating agency, has indicated that the actual credit risk of the banking system may be greater than the bad loans shown in published data. According to the study, loans that have exceeded the threshold but are not classified as bad loans are between 15 and 25 percent.
The study also mentions that restructured and rescheduled loans account for 4 to 8 percent of the total loans. This indicates that the current average NPL of 5.44 percent seen in the banking system does not reflect the entire credit risk.
Bankers also acknowledged that the regulator’s consideration for unclassified loans along with facilities of restructuring and rescheduling could also have suppressed the value of the NPLs. “Some loans are not immediately classified as bad loans due to regulatory concessions, so NPLs could increase further if such concessions are removed in the coming days,” said a banker on anonymity.
Among the banks, Prabhu Bank has the highest bad loan ratio. The bank's NPL more than doubled to 15.55 percent by the end of the last FY.
NIC Asia Bank follows with 9.26 percent, Nepal Investment Mega Bank (NIMB) with 8.66 percent, Himalayan Bank with 7.96 percent and Kumari Bank with 7.46 percent were on the hit lists.
Out of 20 commercial banks, most had their bad loans increase in the review period. Among the state-owned banks, Rastriya Banijya Bank witnessed its NPL rise from 3.79 percent to 3.95 percent and that of Agriculture Development Bank also inclined to from 3.44 percent to 4.07 percent.
A total of five banks succeeded in reducing their bad loans. Nepal SBI Bank's NPL has decreased from 3.35 percent to 2.92 percent. The state-owned Nepal Bank Limited’s NPL decreased from 4.56 to 4.18 percent, Nabil Bank's from 4.48 to 4.20 percent, and Sanima Bank's from 3.01 to 2.87 percent.
