New trend in banking: Government spending and borrower awareness drive Q4 gains

KATHMANDU: Nepal’s banking sector, which has witnessed evolving borrower behavior over the past three decades, is now seeing a new trend—borrowers increasingly prioritize settling dues and managing accounts during the final quarter of the fiscal year, especially by the end of Asar.

Bankers recall that between the early 1990s and 2000s (2050–2060 BS), borrowers often carried a mindset of taking loans with little intention of repayment. “At that time, people used to say—just get the loan, repayment will be figured out later. There was a culture of misuse,” said one senior banker, reflecting on Nepal’s banking history.

That perception shifted significantly after 2060 BS, when the idea of honoring loan commitments became stronger. By the 2070s, corporate discipline among borrowers had deepened. Businesses learned that repaying on time built stronger trust with banks, opened access to further loans, reduced interest costs, and secured future services.

However, bankers now say a new practice is taking hold. In recent years, borrowers have begun to place high priority on balancing their accounts by Asar-end, the closing month of Nepal’s fiscal year. “For the past three to four years, the financial statements of banks look stronger at year-end compared to earlier quarters,” said the banker. “Recovery in the first and second quarters is often slower, but by the end of Asar, both businesses and consumers make sure not to miss payments. Many even plan to adjust provisions in earlier quarters but clear dues by the final quarter.”

Ganesh Raj Awasthi, Deputy General Manager of Nabil Bank, confirmed that the fourth quarter now carries special weight. “There is indeed a mentality that everything must be managed by Asar. But this year, the improvement in banks’ fourth-quarter performance also reflects a genuine rise in economic activity,” he explained. According to him, regulatory flexibility from Nepal Rastra Bank (NRB), including restructuring provisions for SMEs and construction loans up to NPR 20 million, also contributed positively.

Awasthi pointed out that government spending plays a central role in fourth-quarter dynamics. “The main source of funds for the market is still the government. From contractors to other sectors, money flows once treasury releases are made. Capital expenditure trends show that only 30–35 percent is spent by the third quarter, while 75–80 percent is disbursed in the final quarter. Nearly half of government spending comes in just that period, so naturally, the balance sheets look better,” he said.

Subash Jamarkattel, Deputy General Manager of Machhapuchchhre Bank, observed that borrowers themselves have grown more disciplined in recent years, further strengthening the trend. “Customers today are more aware of NRB’s policies and directives. They also understand accounting practices and compliance requirements better than before. While quarterly financial highlights matter for market performance, the final quarter carries greater significance because that’s when distributable profits, dividends, and returns are measured,” Jamarkattel explained.

He added that banks, too, actively prepare customers for timely payments by adopting special recovery strategies in the final quarter. “Over time, these strategies have become institutionalized. NRB has also allowed some flexibility by granting an additional 15–20 days for income recognition, which gives both banks and borrowers room to manage,” he said.

Industry experts note that banking practices were entirely different in the early days, when only a few banks operated and borrowing was seen with suspicion. As Nepal liberalized its economy and banking licenses expanded, competition increased and policies encouraged customers to integrate more closely with banks. This has now led to a more structured, corporate-like approach among borrowers—shaping today’s trend where the fourth quarter has become a focal point for both banks and clients.