This document analyzes the financial performance of banking and financial institutions (BFIs) in Nepal over several years. It provides data on deposits, credits, interest rates, profits, capital adequacy, and other indicators. The Covid-19 pandemic impacted BFIs through decreased business, potential bad loans, and reduced profits. However, the Nepal Rastra Bank and Banking Association took steps like loan restructurings and relaxations to support BFIs. Opportunities for BFIs also emerged such as increased digital banking and opportunities in agriculture and small businesses to support economic recovery.

1. Financial Performance Analysis of BFIs
CA. Krishna Niraula

2. Existing Bank and Financial Institutions
“A” Class
Commercial
Banks
27
“B” Class
Development
Banks
20
“C” Class
Finance
Companies
22
“D” Class
Microfinance
Companies
85
2
Digital Wallet
approved by
NRB
12+
Licensed
Remittance
Companies
52
Infrastructure
Development
Bank
1Cooperatives
34000+
Insurance
Companies
Life 19
Non-life
20
Re-
insurance 1
Source: NRB

3. BFIs Overall Deposit and Credit 2076/77
Source: NRB

4. Banking Business Growth past 5 years
2073 2074 2075 2076 2077
Deposit (billion) 1,764.59 2,093.26 2,471.51 2,880.00 3,490.10
Credit (billion) 1,380.36 1,718.13 2,109.25 2,496.61 2,910.23
-
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
Deposit and Credit of Commercial Banks

5. 21
19 18
17
21
0
5
10
15
20
25
2072/73
2073/74
2074/75
2075/76
2076/77
Deposit Growth Rate %
Commercial Banks
27
24
23
18
17
0
5
10
15
20
25
30
Credit Growth Rate%
Commercial Banks

6. Covid-19 Impact on Commercial Banks

7. Source: NRB
11.39
12.29 12.16
10.11
6.15
6.49 6.60
6.01
0
2
4
6
8
10
12
14
2074 2075 2076 2077
Weighted Avg. Lending and Deposit rate: Commercial Banks
WALR WADR

8. Source: NRB
9.45
9.53 9.56
9.50 9.46 9.43 9.45 9.45
9.36
8.96
8.66
8.50
InPercentage
Months of FY 2076/77
Base rate: Commercial Banks 2076/77
Base rate A class

9. Source: NRB
6.77 6.80 6.75 6.81 6.80 6.79 6.78 6.77 6.74 6.44 6.17 6.01
12.08 11.97 11.98 12.07 11.93 11.94 11.94 11.80 11.77
10.99
10.43 10.11
Shrawan Bhadra Ashwin Kartik Mangsir Poush Magh Falgun Chaitra Baisakh Jestha Ashadh
InPercentage
Months of FY 2076/77
Weighted Avg. Interest Rate on Lending and Deposit:
Commercial Banks 2076/77
WADR WALR

10. Source: NRB
15.93
1.70
1.53
13.45
1.71
1.31
14.40
1.80
1.32
10.78
1.23
1.81
ROE
ROA
NPL
In Percentage
Indicatorsof4years
ROE, ROA and NPL: Commercial Banks
2077 2076 2075 2074

11. Source: NRB
4526
5142
4768
3129
2074 2075 2076 2077
Rs.Incrores
Fiscal Year
Distributable profit: Commercial Banks

12. Source: NRB Monthly Statistics
73%
23%
17%
-17%
2074
2075
2076
2077
Increment in %
FiscalYear
Growth in Net Profit: Commercial Banks

13. Solvency Analysis: Commercial Banks
13.91%
13.71%
13.34%
14.01%
14.24%
13.51%
13.59%
13.95%
Ashwin
Poush
Chaitra
Ashadh
Capital Adequacy Ratio
2075/76 2076/77
Source: NRB
12.13%
11.79%
11.16%
11.78%
12.92%
12.19%
12.06%
12.39%
Ashwin
Poush
Chaitra
Ashadh
Core Capital Adequacy Ratio
2075/76 2076/77

14. Liquidity Analysis: Commercial Banks
76.46%
75.31%
75.88%
70.14%
80.51%
81.19%
78.34%
75.36%
Ashwin
Poush
Chaitra
Ashadh
CCD Ratio
2075/76 2076/77
Source: NRB
25.76%
24.19%
24.79%
29.96%
25.74%
25.26%
25.24%
27.47%
Ashwin
Poush
Chaitra
Ashadh
Net Liquidity Ratio
2075/76 2076/77

15. 1.61%
1.63%
1.72%
1.81%
1.48%
1.54%
1.71%
1.40%
Ashwin
Poush
Chaitra
Ashadh
Non-Performing Loans
2075/76 2076/77
Source: NRB
20.15%
20.22%
18.84%
24.02%
20.70%
19.89%
18.28%
20.32%
Ashwin
Poush
Chaitra
Ashadh
Statutory Liquidity Ratio
2075/76 2076/77
Liquidity and Performance Indicator: Commercial Banks

16. 1,617
1,744
1,209
930
1522
1561
1484
1704
Ashwin
Poush
Chaitra
Ashadh
Net Profit per quarter (in crore)
2075/76 2076/77
2076/77: 55 billion
2075/76: 63 billion
Source: NBA
23.46
24.71
21.47
20.11
23.58
24.88
23.48
25.27
Ashwin
Poush
Chaitra
Ashadh
Earnings Per Share (Rs.)
2075/76 2076/77
Profitability Analysis: Commercial Banks

17. Other Indicators: Commercial Banks
4.85%
4.93%
4.82%
3.95%
4.54%
4.50%
4.53%
4.54%
Ashwin
Poush
Chaitra
Ashadh
Interest Rate Spread
2075/76 2076/77
9.47%
9.49%
9.37%
8.53%
10.06%
9.78%
9.50%
9.61%
Ashwin
Poush
Chaitra
Ashadh
Base Rate
2075/76 2076/77
Source: NBA

18. Risks in Financial Performance of BFIs: Covid-19
• Decreased business
• Possibility of Bad Loans
• Decrease in Profit
• Covid Impact on bank staffs to hit operating performance of BFIs
• Postponing instalments might affect future cash flows
• Risks of undervaluation of collateral
• Risk of Payback Period in Long term project financing
• Technology Risks

19. Steps taken during Covid-19 by NRB & NBA
• Various relaxations for merger
• Relaxation in NPL
• Relaxation in Distributable profit, CCD
• Restructuring and Rescheduling of loans hit by Covid
• Decrease in CRR, Repo rate
• 2% decrease in lending rate by NRB
• Decrease in Institutional Deposit rate by NBA
• Modern Banking Services made free by all BFIs during lockdown
• Business Continuity Plan implemented by banks
• Easy Sanction of Loans to keep economy mobile
• Online Bank Account Opening mechanism
• Online Payment Gateway

20. Opportunities Created to BFIs due to Covid-19
• Digitization: Cashless banking
• Increased habits of online banking
• Merger for robust banking
• Returnee youths may involve in commercial agriculture and MSME sectors
• Opportunity to be self reliant
• Relaxation in Liquidity requirements to increase easy credit
• Operating Cost of banks to reduce
• Lease /group/contract farming
• Import substitution and export promotion of domestic commodities
• Opportunities to generate employment

21. Covid-19: Nepal Going Digital
Source: reporting.nrb.org.np

22. Discussions