KATHMANDU, OCT 31: Nepal has the lowest rate of nonperforming loans (NPLs) in its banking system among the South Asian countries, shows a World Bank (WB) report.
According to the multilateral lending institution, the ratio of NPLs to total loans of the country’s banks and financial institutions (BFIs) was only 1.16 percent as of mid-July 2022. Among the countries with the lowest NPL, Nepal stands at 15th position.
The ratio of nonperforming loans to total loans measures the health and efficiency of the bank by identifying problems with asset quality in the loan portfolio. Lower the value of NPLs, lesser will be the financial risk to the BFIs.
The WB has attributed the lowest NPLs to Nepal Rastra Bank adopting stringent policy for the country’s banking system. The central bank takes prompt action against any BFIs that have NPLs of more than five percent.
Among the South Asian countries, Bangladesh has the highest NPLs of 7.97 percent in its banking system. It is followed by Pakistan with NPLs of 7.89 percent. The index for the Maldives and India are 6.69 percent and 6.54 percent, respectively.