February: Nepal's non-performing loans (NPLs) in the banking sector are lower than that of other South Asian countries. This is the finding of a recent study conducted by the Confederation of Banks and Financial Institutions Nepal (CBIFIN) based on the latest World Bank data.

In 2020, the share of non-performing loans (NPLs) of commercial banks, development banks, and finance companies in Nepal was 1.7%, which is much less than the NPF of other South Asian countries.

Among the South Asian countries, Pakistan has the highest non-performing loans at 9.2 percent. The Maldives has 8.3 percent non-performing loans and India has 7.9 percent non-performing loans. Similarly, non-performing loans (NPLs) stood at 7.7 percent in Bangladesh and 4.9 percent in Sri Lanka.

While non-performing loans (NPLs) of other South Asian countries are around 5 percent to 9 percent, the fact that Nepal’s bad debts are below 2 percent is a positive outcome, argue experts. As of mid-November, Nepal's non-performing loan has been limited to 1.37 percent.

Banking expert BN Gharti said that the situation of Nepal’s banking sector is good in terms of non-performing loans. He said that such a result has come due to the close monitoring and supervision of the regulatory body Nepal Rastra Bank (NRB).

“On top of that, Nepali banks have also matured recently. With the reduction in the number of banks, the management has also improved,” he said.

The share of non-performing loans in the Nepali banking sector had reached about 30 percent in 2062-63 BS. Based on that, Gharti understands that Nepali banks have been able to manage loans well.

He said most economic sectors have been affected by the Covid-19 pandemic, and non-performing loans could be a problem. “NRB has made various policy arrangements to reschedule or restructure loans in the Covid affected area.”

As a result, banks didn't do provisioning on Covid-affected loans and refinancing was used to pay interest on such affected loans. Nepal's problem was covered in the case of non-performing loans, he said.

The International Monetary Fund has also mentioned that non-performing loans are covered in Nepal. CBIFIN has also made public the study report with suggestions for the solution to the liquidity crunch faced by the banking sector of Nepal.