Kathmandu, Nov 13: In recent years, as Nepal’s economy has slowed down, the banking sector has come under increasing pressure due to the rise in non-performing loans (NPLs) and non-banking assets (NBAs).
According to the first quarter financial reports for FY 2082/83BS (2025/26), the growing volume of bad loans has started to squeeze banks’ profitability. The average NPL ratio of commercial banks, which stood at 4.04% at the end of Ashar (mid-July 2025), rose to 4.89% by the end of Ashoj (mid-October 2025). This means that 4.89% of total loans have become non-performing, creating serious recovery challenges for banks.
Similarly, non-banking assets have also increased compared to the previous quarter. As of Ashoj, the total NBAs of commercial banks rose by 1.09%, reaching Rs 43.61 billion, up from Rs 43.14 billion in Ashar.
Bankers point out that in addition to these figures, over Rs 10 billion worth of bad loans have been written off over the past three fiscal years — losses that, in effect, represent non-performing loans. According to former Executive Director of Nepal Rastra Bank (NRB) Nar Bahadur Thapa, continuous rise in NBAs is a signal of distress in Nepal’s economy and banking system.
Flawed policy decisions by the central bank, coupled with a lack of accountability from banks, have led to the current situation, experts suggest. The post-COVID flexible policies were misused by banks, Thapa said, which has now backfired. Economic sluggishness has further worsened the issue, and large borrowers — not small ones — are now the main cause of rising NBAs. “While small borrowers were blamed in the past, it is actually the big borrowers who misused the credit and failed to repay, creating today’s problem,” he added.
As of Ashoj, all commercial banks except Standard Chartered Bank Nepal have reported NBAs.
- Rastriya Banijya Bank (RBB) (state-owned) booked Rs 319.9 million in NBAs,
- Nepal Bank – Rs 260 million,
- Global IME Bank – Rs 6.06 billion.
- Everest Bank – Rs 540 million
- Machhapuchchhre Bank – Rs 600 million
- Siddhartha Bank – Rs 720 million
- Nepal SBI Bank – Rs 940 million
Other 13 commercial banks have booked between Rs 1 billion and 6 billion in NBAs.
Meanwhile, banks are struggling to sell collateralized properties acquired through loan defaults. Most of these assets are real estate, but with a sluggish property market in recent years, it has become difficult to find buyers.
Under Nepal’s Land-Related Act, banks are required to sell such collateralized assets within three years of acquisition. However, this has become a major challenge, leading to an increase rather than a reduction in NBAs. Consequently, banks have been lobbying for the establishment of a dedicated Asset Management Company (AMC) to manage and liquidate these assets.
Nepal Rastra Bank is currently working on the legal framework to establish such a company, but the issue has yet to be finalized. Bankers believe that if the AMC is set up, it will significantly ease the burden of managing non-banking assets and help stabilize the sector. #nepal #banks #NPL #NBA
