Commercial banks’ profits increased by around 20 pc in FY 2020/21

Published On: August 20, 2021 07:30 AM NPT By: Republica | @RepublicaNepal

KATHMANDU, August 20: The profits earned by the 27 commercial banks in the last fiscal year soared by 19.31 percent, backed by the flexible monetary policy and the banks’ earnings from the transaction of shares amid the impacts of the COVID-19 pandemic.

According to Nepal Bankers’ Association (NBA), the banks earned a profit of Rs 63 billion in 2020/21 compared to that of Rs 52.80 billion in 2019/20.

However, the net interest earnings grew by just 2.45 percent due to the reduction in the interest rate on lending and low margin of the spread rate. According to NBA President Bhuvan Dahal, a majority of the banks have been maintaining a spread of only 3.62 percent although the central bank has capped it at 4.4 percent.

Over the period, the deposit collection by these banks increased by 21 percent and the loan amounts surged by 28 percent. The distributable profit increased by 35.41 percent to Rs 47.34 billion. Along with the rise in profit earnings, the banks’ average rate of returns has reached 14.90 percent.

At a time when most of the businesses were hard hit by the pandemic, banks were able to increase their profits due to transaction of shares. Nepal Rastra Bank, through the monetary policy last year, had asked the banks to offload their investment on shares of other financial institutions by mid-June.

Experts said that the banks benefited also from an impact of the expansionary monetary policy, which helped the banks to inject additional Rs 800 billion in loans. However, a larger portion of the amount was invested in unproductive and short-term lending including real estate, margin loans and import businesses.

Of the total profit, Nabil Bank bagged the largest chunk of Rs 4.50 billion, a growth of 30.06 percent in the bank’s profits. Global IME Bank made a profit of Rs 4.12 billion and stood at the second in the row, followed by Rastriya Banijya Bank (Rs 3.79 billion), Agriculture Development Bank (Rs 3.69 billion) and Nepal Investment Bank Limited (Rs 3.65 billion). The other banks, too, made good profits.