KATHMANDU, May 25: The non-banking assets of banks and financial institutions (BFIs) increased by 20 percent in the past year, driven by rising loan defaults.
According to Nepal Rastra Bank (NRB), non-banking assets of banks reached Rs 46.10 billion as of mid-April, up from Rs 38.41 billion in the same period last FY — an increase of Rs 7.69 billion.
Non-banking assets are fixed properties kept as collateral by borrowers, which banks auction off when loans turn into bad debt. Proceeds from such auctions allow banks to write off provisioning amounts of bad debts.
Revised interest rate corridor system introduced
The surge in non-banking assets reflects BFIs’ inability to recover outstanding loans and interest from clients. These assets are non-yielding, preventing BFIs from mobilizing funds for revenue growth.
During the review period, non-banking assets of 12 commercial banks increased, while eight banks saw declines. Himalayan Bank recorded the largest non-banking assets at Rs 6.08 billion, up 18.23 percent (Rs 937.7 million). Prime Bank’s non-banking assets more than doubled, rising 109.35 percent to Rs 4.99 billion.
Machhapuchchhre Bank showed the greatest improvement, reducing its non-banking assets by 34.83 percent to Rs 630.75 million. Nepal Bank Limited recorded the lowest non-banking assets at Rs 233.65 million.
In recent years, BFIs have faced rising non-banking assets amid economic slowdown. While interest rates have been reduced, lending portfolios have not expanded, and recovery of outstanding dues remains difficult.
To address the issue, the Supreme Court recently ruled that BFIs can auction non-banking assets even after three years, allowing them to recover loans during the stipulated period.
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