Kathmandu: Prabhu Bank has fallen back into accumulated losses after Nepal Rastra Bank (NRB) ordered the lender to set aside nearly Rs 5 billion in additional loan loss provisions. While approving the bank’s annual report for fiscal year 2024/25, the central bank directed Prabhu Bank to add Rs 4.91 billion in provisions, pushing the bank into a net accumulated deficit.
For the same fiscal year, Prabhu Bank had earlier reported an unaudited profit of Rs 5.44 billion. However, after external auditing and regulatory review, the central bank required substantial additional provisioning, which slashed the bank’s final approved profit to just Rs 870 million.
In its unaudited financial statements, Prabhu Bank had shown accumulated retained earnings of Rs 1.045 billion and indicated a dividend-paying capacity of 4.44 percent. Following the audit and regulatory adjustments, the bank’s position deteriorated sharply, resulting in accumulated losses exceeding Rs 2.5 billion.
Compared with the unaudited financial statements published in June, the annual report released for the bank’s annual general meeting after external audit shows an additional Rs 4.91 billion set aside for loan loss provisions.
In its initial disclosures, the bank had stated that Rs 2.51 billion previously set aside for loan loss provisioning had been written back. However, the audited and regulator-approved financial statements instead show that an additional Rs 2.40 billion had to be provisioned for credit losses.
As of mid-July 2024, Prabhu Bank was carrying accumulated losses of Rs 3.02 billion. By the end of fiscal year 2024/25, this figure had marginally improved to Rs 2.56 billion. Not only in the most recent year, but consistently over the past three fiscal years, there has been a stark gap between the bank’s unaudited figures and its final audited and regulator-approved results, raising serious questions about governance and financial reporting standards at the bank.
In fiscal year 2023/24, a similar pattern emerged. The difference in loan loss provisioning between unaudited and audited figures amounted to Rs 4.16 billion. The bank initially reported provisioning of just Rs 550 million and a profit of Rs 4.48 billion. After external audit, total provisioning rose to Rs 4.72 billion, while profit plunged by Rs 3.97 billion to only Rs 510 million.
The same trend was evident in fiscal year 2022/23. In its unaudited statements, Prabhu Bank reported loan loss provisions of Rs 2.44 billion and a profit of Rs 2.93 billion. Following audit and regulatory scrutiny, total provisioning jumped to Rs 5.21 billion, while profit collapsed to just Rs 280 million.
Each time Nepal Rastra Bank approved the financial statements, it imposed substantial additional provisioning, creating a wide and recurring gap between preliminary and final figures. In one instance, an initial retained profit of Rs 160 million turned into accumulated losses of Rs 2.24 billion after audit adjustments.
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