Kathmandu: Sindhu Development Bank is beginning to see an improvement in asset quality after a period of stress caused by rising non-performing loans, which had earlier put pressure on its capital base.
As bad loans climbed, the bank was forced to set aside higher provisions for potential losses, straining its core capital. However, a gradual pickup in loan recoveries since the final quarter of the last fiscal year has helped its core capital ratio return to the minimum level required by Nepal Rastra Bank.
Despite the operational improvements, the bank remained in the red in the first half of the current fiscal year. Financial statements up to the second quarter show a net loss of Rs 15.5 million.
This is a sharp reversal from the same period a year earlier, when the bank reported a profit of Rs 48.7 million. Last year’s strong profit was largely driven by a one-off write-back of Rs 86.1 million in loan-loss provisions, which had temporarily boosted earnings.
In the current year’s second quarter, the bank set aside Rs 1.8 million as loan-loss provisions, reflecting continued caution over credit risk. Net interest income showed only modest improvement, rising from Rs 56.7 million to Rs 58.8 million.
The bank is still carrying accumulated losses of Rs 228.6 million. Its paid-up capital stands at Rs 557.5 million, with reserves of about Rs 196.2 million. Due to the accumulated losses, net worth per share has fallen to Rs 94.19.
Key risk indicators show that challenges remain. The non-performing loan ratio stands at 6.39 percent, which is elevated compared with industry averages, while the average base rate for the quarter was 7.84 percent.
The core capital adequacy ratio has improved to 11.01 percent, bringing the bank back in line with regulatory requirements, but leaving limited headroom if asset quality weakens again.
Overall, Sindhu Development Bank appears to be stabilizing, though profitability and balance sheet strength are still under pressure.
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