Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal’s commercial banks are under growing financial pressure as both profitability and credit quality weakened in the first quarter of the ongoing fiscal year 2082/83. According to published financial statements, the 20 commercial banks collectively earned a net profit of NPR 13.14 billion during the review period—an 18.47% decline compared to NPR 16.12 billion posted during the same period last year.
Profit fell in 15 banks, while one bank recorded a net loss, indicating broad-based stress across the sector.
Despite some improvement in liquidity conditions following monetary policy adjustments, the quality of bank loans has continued to deteriorate, leading to a sharp rise in Non-Performing Loans (NPL). The sector’s average NPL ratio rose to 4.89% in the first quarter, up from 4.04% at the end of FY 2081/82.
Banking analysts warn that the rising volume of unrecovered loans is forcing banks to increase loan-loss provisioning, which in turn is reducing lending capacity and straining capital adequacy buffers. Many banks are now facing difficulties even when auctioning collateral due to depressed market demand, particularly in the real estate and small business sectors.
Nine Banks Now Above 5% NPL Level
The following major banks recorded the highest levels of NPLs in the first quarter:
Meanwhile, banks like Standard Chartered Bank and Everest Bank continue to maintain relatively low NPL ratios at 1.71% and 0.74%, respectively.
Market Outlook
Banking experts say the rising NPL trend reflects continued pressure in Nepal’s private sector—particularly in construction, SMEs, and real estate, where many borrowers are struggling to repay due to slow market recovery and weak consumption demand.
If NPLs continue to rise in the coming quarters, analysts caution that several banks may face challenges in maintaining capital adequacy and sustaining credit growth, possibly requiring capital injections or mergers in the medium term.
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