Commercial banks allocate Rs 38 bn in taxes, Kumari Bank leads with record growth

KATHMANDU: Nepal’s commercial banks and financial institutions have collectively allocated nearly Rs 38 billion in tax liabilities for the fiscal year 2081/82 (2023/24), marking a significant 22.42% increase compared to the previous fiscal year. According to recently published financial statements, banks set aside Rs 37.92 billion for tax payments to the government, up by Rs 6.94 billion from the Rs 30.98 billion they allocated in FY 2080/81.

Of the total, commercial banks alone accounted for Rs 34.68 billion, following a noticeable rebound in their profitability. This is a 24.26% rise from the Rs 27.91 billion they allocated the previous year, indicating stronger earnings and improved bottom lines in Nepal’s formal banking sector.

By contrast, development banks observed a slight decline of 1.07% in tax allocation, down to Rs 2.72 billion from Rs 2.75 billion a year earlier. Finance companies, meanwhile, recorded a 5.53% jump, collectively setting aside Rs 515 million.

Commercial Banks: Winners, Losers, and Major Shifts

Out of 20 commercial banks, 16 saw their tax obligations increase year-on-year, signaling healthier profits. Only four banks—Prabhu Bank, Himalayan Bank, Nepal Investment Mega Bank (NIMB), and Sanima Bank—reported a decline in tax allocation, reflecting dips in their profitability.

Top Performers

Kumari Bank emerged as the biggest tax contributor, allocating Rs 3.75 billion—a stunning 251.18% increase compared to Rs 1.06 billion the previous year.

Nabil Bank came second with Rs 3.41 billion, a 24.29% increase from the previous year’s Rs 2.74 billion.

NIC Asia Bank recorded the highest percentage growth—a staggering 349.56% increase—from Rs 207.1 million previously to Rs 931.2 million this fiscal year.

Major contributors also include:

Nepal Bank with a 243.14% surge to Rs 1.38 billion

Laxmi Sunrise Bank up 47.11% to Rs 1.77 billion

Rastriya Banijya Bank up 45.88% to Rs 1.63 billion

Standard Chartered Bank Nepal up 42.9% to Rs 529.6 million

Agricultural Development Bank up 42.58% to Rs 1.63 billion

Notable improvements were also seen in NMB Bank (+41.83%), Machhapuchchhre Bank (+31.56%), and Everest Bank (+30.21%), among others.

Declining Performers

Prabhu Bank recorded the sharpest decline, with tax allocation falling by 42.02% to Rs 1.43 billion.

Himalayan Bank followed with a decline of 22.78% to Rs 1.65 billion.

NIMB saw a 16.66% decrease, allocating Rs 2.74 billion.

Sanima Bank registered a small drop of 2.92% to Rs 995.9 million.

Even with declines, banks like NIMB and Prabhu remain among the largest overall taxpayers due to their existing scale.

Development Banks & Finance Companies

Among development banks, Muktinath Bikas Bank allocated the highest tax at Rs 686.1 million (up 28.28%). The biggest surge was observed at Saptakoshi Development Bank, which saw tax provisions jump by 240.23% to Rs 32.8 million. Other notable gains were made by Garima Development Bank (+185.16%) and smaller institutions like Salapa, Green, and Sangrila Banks.

During the review period, bigger development banks including Kamana Sewa, Shine Resunga, Mahalaxmi, Lumbini, and Jyoti continued to contribute steadily but without notable changes.

Within finance companies, Manjushree Finance led the sector, allocating Rs 159.4 million, followed closely by ICFC Finance (Rs 154.9 million) and Progressive Finance (Rs 47.7 million). Pokhara Finance, Central Finance, Sri Investment, Guweshwori Merchant Banking, Nepal Finance and others remained below Rs 50 million, with smaller entities like Best Finance contributing less than Rs 1 million.

Implications & Economic Context

Despite an overall increase in tax allocation, analysts note that this does not necessarily reflect macroeconomic robustness. The surge is largely due to higher interest rate margins and non-interest income, not actual industrial growth. Several commercial banks reported higher earnings from trading government securities and remittance inflows, rather than expansions in private sector lending.

The contrasting decline in development bank contributions may indicate sluggish lending to SMEs and mid-sized projects, one of the backbones of Nepal’s productive sector. Rising non-performing assets and limited credit demand also pressured profitability.

Moreover, while commercial banks like Kumari and Nepal Bank posted triple-digit growth in tax liabilities, this is partly due to previous year’s weak profits rather than a genuine surge in 2023/24 economic activity.

Nepal’s banking sector remains profitable despite sluggish GDP growth, reflecting a disconnect between real economic expansion and financial sector performance. Economists warn that if the government and regulatory agencies do not incentivize productive lending and employment-generating investments, the banking sector may continue to profit even as the broader economy struggles.