KATHMANDU, July 7: The ratio of bad loans of commercial banks has jumped to 5.41 percent, increasing risk in the country’s banking system.
As per the Monetary Policy for 2026/27 unveiled by Nepal Rastra Bank (NRB), loans classified in the "watchlist" category have increased from 6.7 percent to 11.1 percent, indicating that more bad loans will appear in the future and the banks' lending capacity will be further restricted.
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The most risky aspect of the financial system is the real estate-based loan structure. According to the NRB report, about three-fifths of total loans are based on land and home as collateral, and 84 to 86 percent of the loans of development banks and finance companies are secured by real estate.
The real estate sector is stagnant, making it difficult for banks to recover their bad loans by auctioning collateral, reads the NRB review.
