KATHMANDU, July 14: Non-banking assets of banks and financial institutions (BFIs) increased by notable amounts in the first 11 months of the current fiscal year (FY), thanks to the soaring bad debts of the BFIs.
The records maintained by Nepal Rastra Bank (NRB) show that the non-banking assets of the BFIs increased by Rs 10.20 billion during mid-July 2024 and mid-June 2025. During the review period, the non-productive assets rose to Rs 45.70 billion from Rs 35.50 billion.
The surge in non-banking assets is attributed to the BFIs’ inability to recover their outstanding loans and interest amount from their clients. Due to this reason, the BFIs recorded their non-performing loan (NPL) at 5.24 percent on an average, up from 3.98 percent a year ago.
Based on the overdue period of loans issued by banks, the NRB classifies NPLs into three categories: substandard, doubtful, and bad loans. The bad loans refer to those with overdue periods exceeding one year.
Likewise, non-banking assets are fixed properties kept as collateral by borrowers, which banks auction off when loans turn into bad debt. Banks can write off the provisioning amount of bad debts using proceeds from auctioned collateral.
The NPLs of commercial banks alone has reached 5.05 percent on an average. As a result, the non-banking assets of commercial banks during the review period surged by Rs 8.60 billion, up from Rs 30.19 billion to Rs 38.79 billion.
The NPLs of development banks reached 5.56 percent. Their non-banking assets increased by Rs 790 million to Rs 4.16 billion in total.
Finance companies recorded their NPLs at 13.04 percent. Their non-banking assets grew by Rs 780 million, up from Rs 1.96 billion to Rs 2.74 billion in the first 11 months of FY 2024/25.
Meanwhile, the growth rate of credit flow of commercial banks slowed down with the approaching FY end. According to the records with the Nepal Bankers’ Association, the banks collected additional deposits of Rs 179 billion in three weeks as of July 7, taking it to Rs 6.437 trillion in total. On the other hand, banks increased their lendings by just Rs 19 billion totaling to Rs 4.966 trillion.