Banks’ NBA surge to Rs 46.10 billion as loan defaults rise, Seven banks reduce exposure

KATHMANDU Non-banking assets (NBA) held by Nepal’s banking sector have crossed Rs 46 billion, reflecting growing stress in loan recovery as borrowers struggle to repay debt and banks are increasingly forced to acquire collateral through auctions.

According to data from the central bank, total non-banking assets of banks and financial institutions reached Rs 46.10 billion as of the end of Chaitra in the current fiscal year 2082/83, marking a 20 percent increase compared to the same period of the previous fiscal year.

In the corresponding period of FY 2081/82, banks had reported Rs 38.41 billion worth of non-banking assets. The increase of Rs 7.69 billion highlights mounting pressure on Nepal’s financial system amid slower credit recovery and persistent economic weakness.

Why Are Non-Banking Assets Rising?

The steady rise in non-banking assets indicates a worsening loan repayment environment across the banking sector.

When borrowers fail to repay loans, banks are required to auction pledged collateral to recover outstanding dues. However, in many cases, the collateral remains unsold due to weak market demand, compelling banks to take ownership of the properties themselves. These acquired assets are then categorized as non-banking assets (NBA).

Bankers say the trend is closely linked to rising loan defaults, which have also contributed to the increase in non-performing loans (NPLs) across the sector.

A growing stock of non-banking assets is generally viewed as a negative indicator for the banking industry because it locks capital into unproductive assets rather than circulating funds through lending.

In response, the central bank, Nepal Rastra Bank, has announced plans to establish an Asset Management Company (AMC) to manage distressed and idle assets. However, no concrete operational framework or implementation modality has yet been finalized.

Himalayan Bank Holds Highest Non-Banking Assets

According to central bank statistics, Himalayan Bank reported the highest volume of non-banking assets among commercial banks.

The bank’s NBA climbed to Rs 6.08 billion, up 18.23 percent or Rs 937.7 million from Rs 5.14 billion recorded in the same period last year.

Prime Bank Sees Sharpest Increase

Among all banks, Prime Commercial Bank posted the highest growth in non-banking assets.

Its NBA surged by 109.35 percent, rising from Rs 2.38 billion last year to Rs 4.99 billion during the review period, an increase of Rs 2.60 billion.

Banks Reporting Higher Non-Banking Assets

Data from the central bank show that 12 banks recorded growth in non-banking assets, including:

• NMB Bank: up 76.39 percent to Rs 2.01 billion
• Citizens Bank International: up 52.31 percent to Rs 1.57 billion
• Nepal SBI Bank: up 52.19 percent to Rs 1.35 billion
• Nepal Investment Mega Bank: up 48.54 percent to Rs 4.62 billion
• Prabhu Bank: up 42.40 percent to Rs 1.89 billion
• Laxmi Sunrise Bank: up 41.40 percent to Rs 2.42 billion
• Agricultural Development Bank: up 37.61 percent to Rs 1.38 billion
• Sanima Bank: up 29.70 percent to Rs 1.10 billion
• Nepal Bank Limited: up 14.47 percent to Rs 233.6 million
• Siddhartha Bank: up 7.41 percent to Rs 810.1 million

Seven Banks Reduce Non-Banking Assets

Meanwhile, seven banks managed to reduce their non-banking asset exposure, indicating stronger recovery or asset disposal efforts.

These include:

• Machhapuchchhre Bank: down 34.83 percent to Rs 630.7 million
• Everest Bank: down 17.28 percent to Rs 506.8 million
• NIC Asia Bank: down 9.14 percent to Rs 4.16 billion
• Nabil Bank: down 6.66 percent to Rs 3.54 billion
• Rastriya Banijya Bank: down 2.80 percent to Rs 310.9 million
• Kumari Bank: down 1.38 percent to Rs 2.51 billion
• Global IME Bank: down 1.26 percent to Rs 5.92 billion

Growing NBA Signals Continued Banking Sector Stress

The rise in non-banking assets comes as Nepal’s banking system continues to grapple with sluggish loan demand, weak business activity, real estate market corrections, and increasing repayment challenges.

Analysts say reducing non-banking assets and resolving stressed loans will remain a critical challenge for banks and regulators, particularly as the government and central bank seek to restore liquidity flow and improve private sector confidence in the economy.

Non-Banking Assets of Banks (in Rs. 10 Lakhs)