NPL of BFIs hits 10-year high

KATHMANDU, JUNE 19: The Non-Performing Loan (NPL) of Banks and Financial Institutions (BFIs) has reached a 10-year high due to the COVID-19 pandemic and economic recession. According to statistics from the Nepal Rastra Bank (NRB), the NPL rate, which was recorded at 4.10 percent in 2071 B.S., now stands at 3.78 percent—the highest in the last 10 years.

Due to sluggish business and industrial activities, borrowers have stopped repaying their loans to BFIs. This is a major reason behind the increase in NPL, according to experts. They also argue that protests launched by individuals like Durga Prasai and Maniram Gyawali have made it difficult for BFIs to recover their loans.

Currently, the NPL rates of commercial banks, development banks, and financial companies stand at 3.89 percent, 3.63 percent, and 10.40 percent, respectively.

With the increase in NPL, the dividend rate to be distributed by these institutions to shareholders is also likely to decrease this year. This is because they need to set aside huge funds for a loan loss provision to tackle the increased NPL.