The commercial banks of the country have reported a heavy decline in their return on equity and return on asset in the current fiscal year as a result of increase in their cost of funds. According to the reports of the banks, their return on equity was 17.95 per cent in the first quarter of this fiscal year as compared to 23.44 per cent in the same period last year. The return on asset too has come down to 1.81 per cent this year compared to 1.96 per cent last year.

 

The report also shows that the cost of funds of the banks has increased from 5.23 per cent in the first quarter of the previous year to 7.52 this year.

 

The only bank that enjoyed a decrease in the cost of funds is Agriculture Development Bank (from 6.57 per cent to 5.21). Laxmi Bank had the highest cost of funds (11.8 per cent) in the first quarter of the current fiscal year while the lowest was that of Nepal Bank Ltd. (2.63 per cent). The cost of funds is lower in the government-owned banks and in the relatively older banks.