Improved Bank Recovery Boosts Outstanding Interest, Net Profit Reaches NPR 6.5 Billion
Thanks to Nepal Rastra Bank’s accommodative loan policies and enhanced recovery processes, commercial banks have seen their net profits increase by 24.59 percent in the last fiscal year, reaching NPR 6.593 billion. The amount set aside for loan loss provisions fell by 23 percent, positively impacting banks’ profitability. Kumari Bank reported a profit increase by recovering NPR 143 million. In the last fiscal year, Nabil Bank led with a profit of NPR 790 million, while Prabhu Bank registered a negative profit of NPR 243 thousand. The data is as of 31 Shrawan, Kathmandu.
The banking sector has experienced improvements in loan defaults and recovery issues. The easing of loan regulations by Nepal Rastra Bank has led to better recoveries, reflecting positively on financial indicators of banks. According to last fiscal year’s data, the actual net profit of 20 operating commercial banks stood at NPR 6.593 billion, marking a 24.59 percent increase compared to the previous year’s net profit of NPR 5.292 billion.
The overall profit reported by banks was NPR 7.01 billion for the period. This profit figure includes accrued but uncollected interest income. Outstanding interest amounted to NPR 416 million in the fiscal year, representing approximately 5.94 percent of banks’ net profits. In the prior fiscal year, banks had recovered NPR 1.335 billion from outstanding interest. Banks and financial institutions prepare their financial statements in accordance with Nepal Financial Reporting Standards.
The main factors behind profit growth were lower provisions for loan losses and increased loan recoveries. However, only modest improvement was observed in banks’ primary income source: interest income. Although interest rates declined in the financial sector, banks’ net interest income rose by just 1.27 percent. One bank noted that higher liquidity in the financial system and reduced loan demand during the same period restrained growth in interest income.
