Kathmandu: The extensive asset quality review of Nepal’s top 10 commercial banks will begin next week.
The process will commence following Thursday’s agreement with the Bangladeshi audit firm Howladar Yunus & Co, which was selected through the procurement process.
A total of 22 chartered accountants with international audit experience will be involved, though six (four from Bangladesh and two from Nepal) were present for Thursday’s agreement. The remaining accountants will join next week, according to Nepal Rastra Bank (NRB).
The loan portfolio review, starting next week, will be conducted in two phases—offsite and onsite. NRB stated that the first phase will focus on offsite assessment, followed by onsite inspection after Dashain–Tihar (early November), with the final report expected by the second week of Magh (end of January 2026).
Although six audit firms participated in the procurement process called by NRB, only Howladar Yunus & Co qualified in the technical proposal stage.
The competitors included Deloitte Partner Sri Lanka, Howladar Yunus & Co Bangladesh, KPMG Assurance & Consulting Services India, JV Mehra JKSS SSBDI JV, MSK & Associates India, and JV SRBA & BK Agrawal & Co. Nepal. Among them, Howladar was selected in the technical round.
After the firm also qualified in the financial proposal stage, and no complaints were filed during the seven-day claim period, NRB invited the company for an agreement.
The government had committed to reviewing the loan portfolios of the top 10 commercial banks as a condition while obtaining the Extended Credit Facility (ECF) from the International Monetary Fund (IMF). The IMF had long raised concerns over the accuracy of non-performing loan (NPL) figures published by Nepali banks, suspecting that evergreening practices were being used to artificially show better asset quality.
Amid growing import pressures post-COVID, which strained foreign currency reserves, the Nepal government had signed the ECF agreement with the IMF. As part of that agreement, the loan portfolio review of the 10 largest commercial banks was mandated.
In the first round of procurement, the selected firm failed in the financial proposal stage. A second procurement was then initiated, in which Howladar Yunus & Co qualified in both technical and financial rounds. On July 22, NRB published the contract award notice, stating that Howladar would be paid Rs 6,254,912 (excluding VAT) and US$ 271,679. The total cost, including VAT, amounts to Rs 49.4 million for the loan portfolio review.
As major festivals approach, NRB said the initial phase will focus on analyzing banks’ reported data, with onsite inspection beginning only after Dashain–Tihar. The review will be based on loan investments as of the end of Chaitra (mid-April).
Howladar Yunus & Co has already confirmed the availability of 22 experts for the review, including 20 Bangladeshis and two Nepalis. NRB will also provide supporting staff. Work will begin simultaneously at all 10 banks, with each bank being reviewed by a team consisting of two representatives from Howladar and two from NRB. Representatives were selected based on their international auditing experience.
Banks, however, are concerned that the review may require them to increase loan-loss provisioning. They argue that their lending is backed by sufficient collateral, which should be considered positively. Still, some bankers admitted that practices such as extending loans to repay existing ones, diverting loans to different purposes, and repaying loans from income generated by unrelated projects could affect the assessment, even if collateral exists.
Based on loan exposure at the end of Chaitra, the top 10 banks to undergo review are Global IME Bank, Nabil Bank, Nepal Investment Mega Bank, Rastriya Banijya Bank, Kumari Bank, Laxmi Sunrise Bank, Prabhu Bank, Himalayan Bank, NMB Bank, and NIC Asia Bank.
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