Non-banking assets of Nepali commercial banks rise nearly 20% amid weak loan recovery

KATHMANDU: Nepal’s commercial banks have reported a sharp rise in non-banking assets as economic slowdown, weak real-estate activity, and mounting difficulties in loan recovery continue to pressure the financial sector.

According to second-quarter financial statements published by commercial banks, total non-banking assets of 19 banks reached Rs 46.56 billion by mid-January (Poush end). This represents an increase of 19.80%, or Rs 7.69 billion, compared to Rs 38.86 billion recorded in the same period of the previous fiscal year.

Analysts say the rise reflects a growing stock of collateral assets acquired by banks after borrowers failed to repay loans, particularly in the property and construction sectors where transactions remain sluggish.

Only a few banks reduce such assets

A limited number of banks managed to reduce their non-banking holdings:

• Rastriya Banijya Bank’s assets declined by 2.98% to Rs 288.7 million.
• Everest Bank’s fell slightly by 0.67% to Rs 516.9 million.
• Machhapuchchhre Bank cut its holdings sharply by 43.86% to Rs 600 million.
• Kumari Bank reduced them by 6.63% to Rs 2.49 billion.

Except for these four institutions, all other commercial banks reported increases.

Strong growth in several major banks

Among the banks with rising non-banking assets:

• Nepal Bank’s rose 29.45% to Rs 264.2 million.
• Nabil Bank posted a modest increase, reaching Rs 3.41 billion.
• Nepal Investment Mega Bank’s holdings climbed 25.78% to Rs 3.87 billion.
• Himalayan Bank recorded a 44.21% jump, pushing its total to Rs 6.13 billion.
• Nepal SBI Bank saw the largest surge, up 188.27% to Rs 1.02 billion.

Other banks also reported notable growth:

• NIC Asia Bank: up 5.97% to Rs 4.31 billion
• Laxmi Sunrise Bank: up 42.21% to Rs 2.24 billion
• Siddhartha Bank: up 9.68% to Rs 772 million
• Agricultural Development Bank: up 31.61% to Rs 1.33 billion
• Global IME Bank: up 7.70% to Rs 5.99 billion
• Citizens Bank: up 32.69% to Rs 1.27 billion
• Prime Commercial Bank: up 118.08% to Rs 4.41 billion
• NMB Bank: up 62.90% to Rs 1.83 billion
• Prabhu Bank: up 44.18% to Rs 1.75 billion
• Sanima Bank: up 39.29% to Rs 1.01 billion

Banking experts note that disposing of such assets has become increasingly difficult due to depressed land prices and weak investor demand, turning asset management into a major operational challenge.

Bad loans also climbing

The rise in non-banking assets comes as non-performing loans (NPLs) increase across the banking system.

Financial statements of 20 operating commercial banks show that the average bad-loan ratio reached 5.08% in the first six months of the current fiscal year, up from 4.49% in the same period last year.

Although the sector’s net profit grew by 11.51% year-on-year, asset quality has deteriorated. Out of 20 banks, only eight managed to reduce their bad-loan ratios, while the rest recorded slight increases.

During the review period, seven commercial banks reported NPLs above 5%.
The highest ratio was recorded by Himalayan Bank, whose bad loans climbed to 7.97%, up sharply from 4.98% a year earlier.

Economists say the simultaneous rise in bad loans and non-banking assets signals persistent stress in Nepal’s credit cycle, with recovery likely to depend on broader economic revival, improved property demand, and stronger borrower repayment capacity.