Banks once rushed to open branches in Metros, now struggle to shut them

KATHMANDU: Banks and financial institutions in Nepal, which once competed aggressively to open branches in metropolitan cities, are now facing mounting pressure to merge or close outlets amid rising costs and rapid growth in digital banking.

“There are more than 600 bank branches within Kathmandu alone. In Birgunj, some banks have two or three branches—our bank itself has three. In Biratnagar, we operate five branches,” said Jayendra Rawal, Assistant Chief Executive Officer of NIC Asia Bank, highlighting the heavy concentration of branches in major cities.

Nepal Rastra Bank (NRB) data show that while Nepal currently has 5,104 branches of commercial banks, 1,134 branches of development banks, and 291 branches of finance companies nationwide, a disproportionate number are clustered in just six metropolitan cities. These six metros—Kathmandu, Lalitpur, Pokhara, Bharatpur, Biratnagar and Birgunj—alone account for 1,319 commercial bank branches, 277 development bank branches, and 94 finance company branches.

According to NRB, a total of 1,690 branches of banks and financial institutions are operating across the six metropolitan cities. Kathmandu Metropolitan City has the highest number with 825 branches, followed by Pokhara with 313, Lalitpur with 216, Bharatpur with 146, Biratnagar with 103 and Birgunj with 87 branches.

In Kathmandu alone, there are 670 commercial bank branches, 113 development bank branches and 42 finance company branches. Pokhara hosts 220 commercial bank branches, 78 development bank branches and 15 finance company branches, while Lalitpur has 179 commercial, 22 development and 15 finance company branches.

Citing the rapid growth of electronic and digital payment systems and the excessive number of branches in metropolitan areas, NRB has allowed banks and financial institutions to consolidate and merge branches located within short distances. This provision was introduced through the first quarterly review of the monetary policy for the current fiscal year 2082/83.

Banker Paras Bikram Thapa said branch mergers could significantly reduce costs. “A new branch usually takes one to two years to become profitable and costs around Rs 5–7 million to set up. Banks with multiple branches in close proximity can save Rs 5–6 million by merging them,” he said.

NRB data show that NIC Asia Bank has the highest number of branches in metropolitan cities, with 133 outlets across the six metros. It is followed by Global IME Bank with 117 branches, Nepal Investment Mega Bank with 111, Kumari Bank with 92, Prabhu Bank with 89, Nabil Bank with 82 and Laxmi Sunrise Bank with 78 branches.

Nabil Bank Deputy CEO Adarsh Bajgain said branch operating costs are high while customer footfall has sharply declined due to digitization. “Earlier, there used to be queues outside branches. Now, customers hardly visit. Closing branches reduces operating costs and brings clear financial benefits,” he said.

Laxmi Sunrise Bank Senior Deputy CEO Sumedh Bhattarai said branch mergers should not be limited to metropolitan cities alone. “There are more branches than necessary not only in metros but also in municipalities. Most transactions are now digital, and customers no longer visit branches. Expanding branch mergers beyond metros has become a necessity,” he said.

As digital banking continues to expand, Nepal’s banking sector appears to be entering a phase where rationalizing branch networks—once seen as symbols of growth—has become an operational and financial imperative.