Kathmandu: After two failed attempts and a prolonged legal dispute, Nepal Rastra Bank (NRB) has finally selected a company to conduct an extensive asset quality review (AQR)—or loan portfolio review—of the country’s 10 largest commercial banks.
Bangladesh-based auditing firm Howladar Yunus & Co. has won the contract to carry out the international audit.
Among the several companies that submitted proposals, Howladar Yunus was chosen by NRB after being deemed technically qualified and securing the highest score in the combined evaluation of technical and financial proposals.
According to the NRB contract notice, the firm will receive Rs 6.25 million (excluding VAT) and US$ 271,679 for the consultancy services. In total, including VAT, the loan portfolio review is expected to cost approximately Rs 49.4 million.
This audit marks a long-awaited step forward in financial sector reform.
NRB had initiated plans for an international audit of the top 10 banks in March 2024, following Nepal’s agreement with the International Monetary Fund (IMF) for a US$ 395.9 million Extended Credit Facility (ECF).
This reform package, signed in December 2021, committed Nepal to enhancing financial and monetary stability.
Under the ECF agreement, the IMF agreed to disburse the amount in seven tranches over 38 months. The first installment of US$ 110 million was released on 12 January 2022, while the second—delayed by 16 months—was released only in May 2023.
Although the third and fourth disbursements were scheduled for December 2022 and June 2023 respectively, delays pushed the third to December 2023. The fourth and fifth tranches—amounting to over Rs 11.3 billion—were finally released on Asar 26 and Chaitra 2, 2081.
The ECF agreement explicitly required a loan portfolio review as a condition for continued financial support. Despite initiating the process earlier, NRB’s first attempt at hiring an auditing firm failed due to procurement rule issues. Initially, six firms were shortlisted, including Deloitte Partners (Sri Lanka), KPMG Assurance and Consulting Services (India), and several India-Nepal joint ventures.
However, during the second bidding process, only Howladar Yunus & Co. qualified technically, which made it the sole candidate for financial evaluation. The India-Nepal JV firm Mehra–JKSS–SSBDI, which had failed in the technical round, filed a writ at the Supreme Court challenging the procurement process. Just three weeks ago, the court dismissed the writ, clearing the way for NRB to proceed with the contract.
Previously, NRB had also cancelled a selection process in September 2024 after only one firm had qualified and raised concerns over competitive transparency. The current selection of Howladar Yunus thus brings a long-delayed process back on track.
The audit—termed an extensive asset quality review by the NRB—will involve a thorough, independent evaluation of the loan portfolios of Nepal’s 10 largest commercial banks. The firm is required to produce a comprehensive report covering all aspects of bank lending practices, and offer policy suggestions to improve Nepal’s banking and financial system.
The audit will be conducted according to Nepal Financial Reporting Standards (NFRS), International Financial Reporting Standards (IFRS 9), and global auditing standards. It will assess the effectiveness and credibility of each participating bank’s accounting and risk management practices.
Key areas of focus will include analysis of credit risk identification policies, procedures, frameworks, and risk mitigation strategies. Howladar will also evaluate the soundness of each bank’s loan monitoring and credit risk management systems, comparing them to international best practices.
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