Kathmandu: NIC Asia, Himalayan, Nepal Investment Mega, Prabhu, and Prime Commercial Bank have decided to skip the distribution of advance bonuses to their staff this year. Traditionally, Nepali banks and financial institutions allocate a portion of their annual net profit to be distributed as employee bonuses, often releasing an initial instalment in the first week of Shrawan, immediately following the close of the fiscal year. However, these five commercial banks have deviated from this long-standing practice this time around.
While the Bonus Act mandates that every profit-making establishment must set aside ten percent of its net annual profit for its workforce, current financial challenges have hindered early disbursements. According to Section 5 of the Act, this allocation is a legal requirement, and banks typically fulfil it in two phases: once as an advance payment shortly after the fiscal year ends, and the remainder following the approval of the Annual General Meeting. This year, the lack of immediate payouts signals a more cautious fiscal approach by these major lenders.
The decision for Himalayan, Prabhu, NIC Asia, and Nepal Investment Mega Bank is primarily driven by a significant rise in non-performing loans (NPL), which has forced them to increase their loan loss provisioning. Coupled with accumulated losses in some instances, these banks have opted to wait for the completion of external audits and formal financial statement approval from the Nepal Rastra Bank. They intend to determine their actual distribution capacity only after receiving regulatory clearance, ensuring that any bonuses paid are in line with their final audited performance.
Prime Commercial Bank, which has historically been known for its generous bonus distributions, has also refrained from providing an early payout this year. Although the bank is considered to have a relatively high capacity for rewarding its employees based on its performance, staff members have confirmed that no advance funds have been released so far. The collective hesitation among these five prominent commercial banks highlights a broader trend of financial prudence within the sector as institutions navigate a challenging economic landscape characterized by credit risks and stringent regulatory oversight.
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