Bank loan recovery improves, Sale of non-banking assets rises

January 15, 2026, 04:22:27 PM |

KATHMANDU: Loan recovery by banks has shown a noticeable improvement in recent months, according to sources from the concerned bank. Experts attribute this trend to lower interest rates, increased consumer spending, and higher economic activity across urban centers.

The recovery of loans has been further supported by the sale of non-banking assets, which has helped reduce non-performing loans (NPLs) and strengthen banks’ balance sheets. Sources indicate that heightened demand for residential and commercial properties in urban areas, including the Kathmandu Valley, has contributed to the increased sale of non-banking assets.

“During the first quarter, floods and local protests had negatively impacted loan recovery, creating challenges even in regular collections. However, with the uptick in economic activity, the second quarter has seen improved recovery rates,” said a senior official from one of the banks.

Banks have also benefited from the sale of non-banking assets, which has reduced provisioning requirements, increased profits, and reinforced capital strength. Sources explained that concerns over deteriorating balance sheets due to rising NPLs and non-banking assets prompted banks to focus more on loan recovery in recent months.

In the first quarter, provisioning had increased due to lower loan recovery, affecting overall profitability. At that time, the average NPL of banks and financial institutions had exceeded 5 percent. Now, with regular loan recovery and increased non-banking asset sales, banks are experiencing relief, according to sources.

The purchase and sale of non-banking assets, particularly land and property, have been rising in urban regions. Sources confirmed that small-volume residential and commercial properties are being actively traded, which has aided banks in reducing non-banking asset holdings.

To encourage buyers, banks are offering financing facilities at minimal interest rates. This approach has led to a significant decline in non-banking assets, with sales reducing by NPR 7 crore in the month of Kartik, and by NPR 14 crore in Mangsir. In the month of Poush, sources report that assets were sold in substantial volumes, providing additional support to bank liquidity.

The increase in asset sales is also linked to changes in the cooperative and property sector. Rising legal disputes in collateral auctions conducted by cooperatives have led more clients to approach banks directly for purchasing non-banking assets. Sources suggest that this trend has been accelerating as borrowers increasingly prefer banks over cooperatives for property transactions, ensuring smoother and more secure deals.

Overall, banks are witnessing a positive shift in both loan recovery and asset management. Improved collections and reduced non-banking assets are expected to continue strengthening financial institutions, enhancing profitability and capital adequacy in the months ahead.

Fiscal Nepal |

Thursday January 15, 2026, 04:22:27 PM |