Kathmandu: The non-banking assets (NBAs) of banks in Nepal have exceeded Rs 50 billion.
Over the last three fiscal years, as real estate transactions have slowed, banks have accumulated more non-banking assets after being unable to sell properties put up for auction.
According to data from Nepal Rastra Bank (NRB) as of mid-July 2025 (end of Ashad 2082), banks and financial institutions collectively hold more than Rs 50 billion in non-banking assets. The total stands at Rs 50.56 billion, up nearly fivefold from Rs 10.52 billion in mid-July 2022 (end of FY 2078/79).
In the past three years, Nepal’s sluggish economy has made it increasingly difficult for banks to recover loans. The non-performing loan (NPL) ratio of banks and financial institutions, which was 1.31 percent in mid-July 2022, had risen to 5.24 percent by mid-April 2025, before slightly improving to 4.62 percent in mid-July 2025, according to NRB data.
When borrowers fail to repay loans and even the collateral auctions remain unsold, banks acquire such assets in their own names—these are classified as non-banking assets.
With NPLs rising and loan recovery stalling, newspaper pages have been flooded with bank auction notices. Real estate transactions remain sluggish, and according to bankers, the Gen-Z protests of early September (Bhadra 23–24) have further hurt the economy, meaning it will take time before property sales and collateral auctions improve.
Santosh Koirala, CEO of Machhapuchhre Bank and president of the Nepal Bankers’ Association, said the Gen-Z movement has temporarily slowed the economy and that banks’ non-banking assets may continue to rise.
As bad loans increase, banks’ loan-loss provisions have also surged to around Rs 300 billion, along with a steady rise in unpaid interest.
By mid-July 2025, banks had set aside Rs 285 billion as loan-loss provisions, while unrecovered interest had reached Rs 60.74 billion — up from Rs 19.63 billion in mid-July 2022. Loan-loss provisions have also jumped sharply from Rs 110.30 billion in 2022.
As NPLs have risen, banks have had to increase provisions accordingly. With more loans going bad, legal recovery processes have filled newspapers with collateral auction and debt repayment notices. Some newspapers have even added extra pages solely for bank auction announcements.
If a collateral auction fails twice, banks must record the asset as a non-banking asset. Since many such assets remain unsold, the government amended the Land Act to allow banks a one-time provision to sell these assets within three years of booking them.
By mid-July 2025, the total NBAs of banks and financial institutions exceeded Rs 50 billion — of which commercial banks alone accounted for about Rs 43 billion. Commercial banks held Rs 42.81 billion, development banks Rs 4.67 billion, and finance companies Rs 3.07 billion.
Both bankers and the NRB have acknowledged that asset quality among banks is deteriorating, calling for alternative management strategies. However, bankers maintain that the situation has not yet reached a critical risk level. They argue that banks are exploring ways to improve asset quality, such as by auctioning collateral, entering the real estate market, or investing in new projects.
Experts suggest that asset management companies (“bad banks”) or tools issued through the Nepal Stock Exchange could be effective, with limited-period funds managing such assets. However, this would require amendments to securities laws.
Around two-thirds of all bank loans are backed by land or buildings. NRB data shows that, as of mid-2025, 64.4 percent of total bank loans were secured by real estate collateral, while 14.8 percent were secured by current assets such as agricultural and non-agricultural goods.
The government and NRB have repeatedly announced plans to establish a “bad bank” to manage non-banking assets and bad loans. Former Governor Maha Prasad Adhikari had said that NRB had begun drafting a separate law to establish such an empowered institution. The previous fiscal year’s monetary policy had announced this plan, but no progress was made, and although the idea was mentioned again in this year’s budget and monetary policy, implementation remains stalled.
The current monetary policy states: “A draft law and regulations for the establishment of a bad bank will be prepared and submitted to the Government of Nepal to help manage the non-performing loans and non-banking assets of banks and financial institutions.” However, no progress has been made. Following the dissolution of parliament after the Gen-Z protests, new legislation is unlikely before the upcoming elections in February.
As NBAs and NPLs grow, banks are forced to spend significant manpower and resources on their management, limiting their ability to research and invest in new projects.
One bank’s non-banking assets reach Rs 6 billion
Some banks’ non-banking assets have exceeded Rs 5 billion, effectively turning them into real estate companies.
As of mid-July 2025, Global IME Bank held the highest amount of NBAs at Rs 6.05 billion, followed by Himalayan Bank with Rs 5.82 billion. Of the 20 commercial banks, 19 have booked non-banking assets, and 13 of them have more than Rs 1 billion each, according to NRB.
NIC Asia Bank ranks third with Rs 4.59 billion in NBAs. Standard Chartered Bank Nepal is the only one with none recorded.
Among banks with less than Rs 1 billion in NBAs are Nepal SBI Bank (Rs 950 million), Siddhartha Bank (Rs 770 million), Machhapuchhre Bank (Rs 600 million), Everest Bank (Rs 560 million), Nepal Bank (Rs 260 million), and Rastriya Banijya Bank (Rs 260 million).
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