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With the sharp slowdown in economic activities in the last one year, payments through electronic modes have also taken a beating in this fiscal year. From the beginning of the current fiscal year, there has been a gradual decline in electronic payment transactions every month. The latest statistics of the Nepal Rastra Bank (NRB) show that digital payments in the country have been continuously shrinking from mid-July to mid-December on a month-over-month basis. Generally, digital payments in Nepal pick up during the festive months of October and November as consumer consumption increases during these months. However, the festive season this year was mired in the economic slowdown impacting digital payments. Also, the FIFA World Cup Qatar 2022, which took place from November 20-December 18, did not lift the consumption activities allowing sluggishness in digital payments to continue. Digital transactions in Nepal took a giant leap after the start of the Covid-19 pandemic in early 2020 which forced people to stay inside their homes during the lockdowns. Backed by the increasing use of smartphones, consumers were fast to adopt digital modes of payments and online shopping to buy daily essential items. The monthly digit payments reached an all-time high of Rs 6,227.648 billion in the last month of FY 2021/22. However, electronic transactions have been on a decline every month in this fiscal year. The NRB data shows digital payments worth Rs 5,688.626 billion took place in Shrawan (mid-July to mid-August), Rs 4,926.715 billion in Bhadra (mid-August to mid-September), Rs 4,605.316 billion in Ashoj (mid-September to mid-October), Rs 3.946.194 billion in Kartik (mid-October to mid-November) and Rs 3,697.658 billion in Mangshir (mid-November to mid-December). Similarly, the real-time gross settlement (RTGS) has shrunk to Rs 2,436.541 billion in Mangshir (mid-November to mid-December) from Rs 4,349 billion in Ashar (mid-June to mid-July). Internet banking transactions stood at Rs 1,1.476 billion in Mangsir, down from Rs 15.638 billion in Ashar. In the meantime, cash withdrawals from automated teller machines (ATMs) declined to Rs 75.224 billion during the review period from Rs 79.459 billion in Ashar. Mobile banking transactions went down to Rs 160.036 billion from Rs 162.255 billion. Wallet transactions have also declined to Rs 17.730 billion from Rs 17.752 billion. However, Quick Response (QR) payments increased to Rs 19.346 billion from Rs 14.526 billion. Transactions made through the point of sales (POS) decreased to Rs 4.459 billion from Rs 5.183 billion. Digital payments were on an increasing trend till the last fiscal year. This trend has reversed in the current fiscal year. Bankers and experts point out the current economic slowdown for this. According to them, the spending capacity of consumers has been hard hit by rising inflation resulting in a decline in digital payments. According to Sanjeev Subba, CEO of Nepal Electronic Payment System (NEPS), as economic activities slowed down, the direct impacts have been seen in electronic transactions. Guru Prasad Paudel, Chief of Payment System Department at NRB says the decline in digital payments is a reflection of the contraction in economic activities. "While we directly cannot say digital transactions are on the decline, the slowdown in economic activities, the prolonged liquidity crunch, and other problems have affected digital transactions," he said. Box Electronic Payment Transactions

Month	Amount	Change
Mangshir (mid-November to mid-December	Rs 3,697.658 billion	-6.29%
Kartik (mid-October to mid-November)	Rs 3,946.194 billion	-14.31%
Ashoj (mid-September to mid-October)	Rs 4,605.317 billion	-6.52%
Bhadra (mid-August to mid-September)	Rs 4,926.715 billion	-13.39%
Shrawan (mid-July to mid-August)	Rs 5,688.626 billion	-8.65%
Ashar (mid-June to mid-July)	Rs 6,227.648 billion

Source: Nepal Rastra Bank

Sagarmatha Insurance Company and Lumbini General Insurance Company have signed the final agreement for the merger. Both companies signed the final agreement on Tuesday. The agreement was signed by Manohar Das Mull, Chairman of Lumbini General Insurance, and Ramakrishna Manandhar, Chairman of Sagarmatha Insurance. As per the agreement, the name of the new entity formed after the merger will be Sagarmatha Lumbini Insurance Company Limited. A special proposal regarding the merger will be tabled in the upcoming general meetings of both companies. Based on the initial agreement between the two companies and the DDA report, the share swap ratio will be maintained at 100:80. Post-merger, the paid-up capital of the company will be Rs 2.62 billion. There will be three each from Sagarmatha Insurance and Lumbini General Insurance on the board of the Sagarmatha Lumbini Insurance Company. The current CEO of Sagarmatha Insurance Chunki Chhetri will be the chief executive officer of the Sagarmatha Lumbini General Insurance Company. The merger drive in the Nepali insurance sector is in full swing. In the last one year, a series of merger agreements have been signed among both, life insurance and non-life insurance companies. The merger momentum in the Nepali insurance sector intensified after the Nepal Insurance Authority (NIA) increased the minimum paid-up capital requirements for insurers of both categories. The authority has increased the paid-up capital of non-life insurance companies to Rs 2 billion while it is Rs 5 billion for life insurance companies. The authority has been pushing for consolidation in the Nepali insurance sector since the new Chairman Surya Silwal took charge of NIA. Of the 19 insurance companies involved in the merger process, six companies have merged to become three and have started their integrated business while 13 others are still in the process of completing their merger process. According to NIA, 10 non-life insurance companies have signed merger MoUs to become five, while nine life insurance companies have also signed merger deals to become four entities. So far, two life insurance companies and 4 non-life insurance companies have completed the merger process and started their integration business. The remaining seven life insurance companies and six non-life insurance companies have not been able to start integrated businesses yet. There have been two successful mergers in the non-life insurance sector in the past year. In July 2022, Himalayan General Insurance and Everest Insurance merged to form Himalayan Everest Insurance Insurance Co. Ltd. Similarly, in October, Sanima General Insurance and General Insurance Company merged to form Sanima GIC Insurance Ltd. The first merger among the life insurance companies took place in the last week of December 2022 when two life insurance companies - Surya Life Insurance and Jyoti Life Insurance - completed their merger process and started integrated business as Suryajyoti Life Insurance Company.

In a clear indication that the liquidity situation in the banking system is easing notably, Nepal Rastra Bank (NRB) issued a reverse repo worth Rs 5 billion last week. A reverse repo is the central bank's monetary instrument to mop up excess liquidity from the market. While issuing the reverse repo, the central bank borrows money from commercial banks to mop up liquidity in the banks. It was the first time in 18 months that the central bank took a move to absorb excess money in circulation. Earlier, the NRB issued a reverse repo amounting to Rs 28.35 billion on July 20, 2021. According to an NRB official who spoke under the condition of anonymity, the latest reverse repo was issued to test the market response. “The banks responded by parking their funds in the central bank which suggests the liquidity situation in the banking sector is easing,” said the official. Easing of liquidity also means that loanable funds are available with the banks. Another indication of the easing liquidity in the banking system is the decreasing interest rate of inter-bank lending which has come down to 4.23 percent on January 27 from 7.34 percent on January 18. According to NRB, the interest rate was 8.15 percent on January 1. “The banks are not using the standing liquidity facility (SLF) and the overnight liquid facility (OLF) to inject liquidity for the last few weeks,” another official of NRB said. “This suggests that liquidity has eased in the banking sector. It will help to reduce interest rates in the coming days.” According to the official, banks have already started lowering the interest rate on deposits and interest rate on lending is also expected to be lowered at least after the fourth quarter of the current fiscal year. The banking system faced a prolonged and a severe liquidity crunch which resulted from massive lending and slow deposit collection in the early months of the last fiscal year 2021/22. With deposits not increasing in the proportion of the lending, the banking system faced a severe liquidity crunch forcing the banks and financial institutions to suspend new lending from the second half of the last fiscal year. Through the monetary policy for the current fiscal year, NRB announced measures to help banks and financial institutions to maintain more liquidity. NRB reduced the targeted growth rate of credit expansion to the private sector to 12.6 percent from the targeted 19 percent in the last fiscal year. As the overexpansion of credit caused a steep jump in imports leading to the depletion of foreign currency reserves besides contributing to high inflation in the last fiscal year, the central bank came up with a plan to reduce the expansion of credit and money supply in the market through the monetary policy. With the banks focusing on deposit collection mostly through fixed deposits, total deposits from the start of the current fiscal year increased by Rs 200 billion till January 28 while the total extension of loans increased by Rs 103 billion, according to NRB. “With deposits increasing by a higher percentage than lending, there has been improvement in liquidity,” the NRB official said. However, most of the deposits the banks and financial institutions received are in the form of fixed deposits. The ratio of fixed deposits to total deposits is around 60 percent, according to NRB. “That’s why many banks will face a liquidity shortage if a few big fixed depositors withdraw their deposits,” said a CEO of a commercial bank.

The price of gold has increased by Rs 500 per tola in the domestic market on Wednesday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the precious yellow metal is being traded at Rs 106, 300 per tola today. The gold was traded at Rs 105, 800 per tola on Tuesday. Meanwhile, the price of silver has increased by Rs 5 and is being traded at Rs 1,370 per tola today.

Prime Minister Pushpa Kamal Dahal and CPN-UML Chairman KP Sharma Oli held a meeting Wednesday. During the meeting that took place at the Prime Minister’s official residence in Baluwatar this morning, the two exchanged views on contemporary political issues and the elections of the President and the Vice-President scheduled for March 9 and 17, respectively. Meanwhile, Province 1 Chief Minister Hikmat Bahadur Karki called on the Prime Minister today itself. On the occasion, they congratulated each other on the elections on their respective positions, exchanging views on making the delivery of the province government further effective.  

Administrator Samantha Power will travel to Kathmandu, Nepal in early February. While there, Administrator Power will meet with civil society leaders, community groups, students, businesses, and government officials to discuss Nepal’s efforts and achievements in becoming a more democratic, prosperous, inclusive, and resilient country. Administrator Power will underscore the United States’ enduring, more than 75-year partnership with the government and people of Nepal. She will highlight USAID’s commitment to increasing our engagement with Nepal and its new government. Administrator Power will announce new efforts to build momentum to strengthen democratic gains in federalism, social inclusion, civil society, and media freedom.

At least 14 people were charred to death and several others injured in a major fire at a multi-storey building in Jharkhand’s Dhanbad on Tuesday evening, The Times of India reported.

"Fourteen people, including 10 women and three children, were killed in the massive fire. Rescue operation is still under way at the site," news agency ANI quoted Dhanbad deputy commissioner Sandeep Singh as saying.

“14 people died and 12 others were injured in the fire. Several people were in the apartment to attend a marriage function. The cause of the fire is yet to be known. We are focusing on rescue. The injured were shifted to a nearby hospital,” Dhanbad SSP Sanjiv Kumar said.

“District officials have completed the rescue and search operation at the building. No one remains trapped and 14 injured people are being treated and they are in stable condition. The portion of the building damaged by fire has been cleared,” the deputy commissioner said. The blaze erupted at 6pm at Ashirwad Tower in Dhanbad's Joraphatak area, around 160km from state capital Ranchi.

Dhanbad deputy commissioner Sandeep Singh, who is monitoring the operation on the spot along with senior police officers, told PTI that the exact number of people who died and suffered injuries is yet to be ascertained, according to The Times of India.

"Several people are reportedly trapped ," a senior police officer said. Jharkhand chief minister Hemant Soren expressed grief over the loss of lives due to the fire.

The first half of FY 2022/23 was quite momentous in the Nepali banking sector in terms of banking consolidation. Three mergers and one acquisition took place in the banking sector, reducing the total number of commercial banks operating in the country to 22. Amid the consolidation drive, times are challenging for banks. Commercial banks that have enjoyed windfall profits even during the Covid-19 crisis years of 2020 and 2021 have found themselves surrounded by a severe liquidity crunch and shortage of loanable funds forcing them to increase interest rates over the past year.   With non-performing loans (NPL) rising, the overall profit of commercial banks has tanked in the first half of the current fiscal year. The unaudited financial reports of commercial banks for the second quarter show their profit declined by 1.34 percent in the first six months of the current fiscal year 2022/23. There has been a significant increase in NPLs of commercial banks in the first half of the current fiscal year. As per the financial reports of 22 commercial banks, their bad loans have gone up by a whopping 111.71 percent. The average NPL of commercial banks has increased to 2.35 percent in the first half of FY 2022/23 compared to 1.11 percent during the same period of FY 2021/22. Bankers say NPLs have risen mainly due to the non-recovery of debts. As the private sector is struggling with rising borrowing rates and a sharp slowdown in market demand, banks are facing challenges to recover loans. According to bankers, the non-payment of loan installment and interest has increased in this fiscal year. Had there been economic activity, it would have been easier for borrowers to pay the principal loan amounts and interest on time, they say. The deposits of commercial banks grew by 9.34 percent totaling Rs 4,647.931 billion by mid-January 2023. At the same time, the extension of loans grew by only 3.45 percent in the first half of the current fiscal year. While banks' interest income grew by 35.65 percent, their interest expenses expanded by much higher during this period. As banks have to pay higher interest rates for deposits amid a prolonged liquidity crunch, their interest income surged by 41.26 percent. This has affected the bank's net interest income which grew by 25.69 percent. Banks saw their net fee income and net trading income shrinking in the first half of the current fiscal. The net fee income decreased by 11.13 percent while net trading income shrunk by 39.04 percent during this period.  15 banks' net profit rise Of the 22 commercial banks, 15 have reported an increase in profits compared to the same period of the last fiscal year. Similarly, six banks have reported a decline in their profits and one bank has posted a loss. Sunrise Bank, Citizens Bank International, Siddhartha Bank, Prime Commercial Bank, Prabhu Bank, and Nepal Bank have reported a decline in their profits. The Agricultural Development Bank reported a loss of Rs 0.128 billion in the first half of the current fiscal.  The banks' quarterly report shows two banks' profit has crossed the Rs 3 billion mark while three other banks earned above Rs 2 billion in profit in this fiscal. There are 12 other banks whose profit has crossed the Rs one billion mark in the first half of FY 2022/23. Nabil Bank records highest profit Nabil Bank has topped the chart as the bank's profit grew by 56.67 percent in the first six months of the current fiscal year. The bank earned Rs 3.41 billion in profit in the first six months of the current fiscal year.  NIC Asia Bank came second with a profit of Rs 3.27 billion, an increment of 36 percent followed by the Global IME Bank reporting a profit of Rs 2.78 billion. However, Global IME's profit grew by a meager 4.42 percent in this fiscal. In terms of percentage growth, Everest Bank has the highest profit growth of 89.49 percent. The bank recorded a profit of Rs 1.58 billion in the first half of this fiscal compared to Rs 0.83 billion in the last fiscal. Standard Chartered Bank's profit also grew by 61.36 percent to Rs 1.90 billion. Meanwhile, Agricultural Development Bank Limited has reported a big slump of 109.06 percent in profit earning in the first half of the current fiscal. The bank has incurred a loss of 0.128 billion in the first half of FY 2022/23 compared to a profit of 1.42 billion during the same period of FY 2021/22. The bank's profit decreased due to an increment in the impairment charges. The bank's NPL also increased from 2.08 percent to 4.52 percent in this fiscal. According to the bank, it has set aside Rs 2.17 billion for impairment charges, an increment of 250 percent compared to the last fiscal.  ADBL posts highest NPL The profits of banks have also been affected by the increment in bad loans as they have to keep aside large amounts of money for the provisioning of bad loans. Provisioning is a practice where banks are required to maintain a certain amount in reserve when loans are not recovered. Of the 22 commercial banks that have published their second quarter report, the Agricultural Development Bank Limited (ADBL) has the highest NPL. The bank's NPL has increased to 4.52 percent by mid-January compared to 2.08 percent during the same period of the last fiscal.  The profit of the ADBL has decreased by a whopping 109.06 percent in the first half of the current fiscal. The bank has incurred a loss of 0.128 billion in the first half of FY 2022/23 compared to a profit of 1.42 billion during the same period of FY 2021/22.  Himalayan Bank Limited (HBL), Sunrise Bank, Kumari Bank, Nepal Investment Bank, and Nepal Bank are the other five banks whose NPL is above 3 percent. The HBL's NPL has reached 3.77 percent in the first half of FY 2022/23 compared to 0.72 percent during the same period of FY 2021/22. Sunrise Bank's NPL increased to 3.36 percent in mid-January 2023 from 1.40 percent in mid-January 2022. The NPL of Kumari Bank and Nepal Bank has increased to 3.15 percent and 3.11 percent, respectively.  The NPL of Kumari Bank increased mainly due to the merger with NCC Bank. As the NCC Bank had a higher NPL, Kumari Bank's overall bad loan increased after the merger.  Rastriya Banijya Bank (RBB) is the only commercial bank that has its NPL decreased in this fiscal year. The government-owned bank has been able to reduce its bad loans by 9.67 percent during the review period. The RBB's NPL has decreased to 2.79 percent in mid-January 2023 from 3.06 percent in mid-January 2022.  Three mergers, one acquisition, and one merger MoU In terms of banking consolidation, the first half of FY 2022/23 was historic. The first six months of the current fiscal year saw three mergers and one acquisition in the banking sector.  Kumari Bank and NCC Bank started unified business on January 1. The second week of January saw two mergers and one acquisition becoming successful in the Nepali banking sector; the Global IME Bank and Bank of Kathmandu merged and commenced their unified business and Prabhu Bank acquired Century Commercial Bank. Nepal Investment Bank and Mega Bank completed their merger and commenced business as Nepal Investment Mega Bank. Two more banks - Laxmi Bank and Sunrise Bank joined the merger bandwagon, signing a memorandum of understanding (MoU) for a merger on January 9.