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The decline in the profit of commercial banks has also hit the government’s tax collection from the banking sector. The income tax payment from the banking sector to the government has declined by 5.59 percent in the nine months of the current fiscal year 2022/23. The banks paid a total of Rs 19.99bn in income tax to the government as of the third quarter of the current fiscal year compared to Rs 21.16bn in the corresponding period of the last fiscal year. According to bankers, the decline in profit in the current fiscal year has directly affected the income tax. “As banks’ income and profit took a beating this year, their contribution to the income tax also suffered,” said Anil Sharma, CEO of Nepal Bankers’ Association (NBA). With bad loans increasing gradually from the start of the current fiscal year, the banks have reported a sharp rise in non-performing loans (NPLs) in the last three months. Bankers attribute the rise in NPLs to the slowing economic activities coupled with higher interest rates, and borrowers’ inability to repay debts. According to them, loan recovery and debt servicing have become difficult of late. With loan recovery and debt servicing becoming difficult, banks have been forced to provision huge amounts for NPLs. On the other hand, the high-interest rate that banks were forced to pay for their deposits in the first half of the current fiscal year, has increased their cost of funds. The NPL of commercial banks stood at 3.03 percent till mid-April, 2023. As NPLs surged sharply, the loan loss provisions of banks also increased. The amount for provisioning has increased by 324.27 percent. Banks have set aside Rs 31.32bn for loan loss provisions till mid-April 2023 compared to Rs 7.38 billion during the same period of the last fiscal year. While banks’ interest income grew by 31.60 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 expense surged by 34.98 percent. This has affected the bank's net interest income which grew by 25.43 percent. Banks saw their net fee income and net trading income shrinking in the first nine months of the current fiscal. The net fee income decreased by 5.03 percent while net trading income shrunk by 36.74 percent during this period. The challenging macroeconomic climate has affected the profitability of banks; the commercial banks recorded a net profit of Rs 48.18bn in the third quarter of this fiscal compared to Rs 51.01bn during the same period of the last fiscal. Banks and financial institutions (BFIs) have to pay 30 percent in income tax in Nepal. Among the commercial banks, Nabil Bank paid the highest income tax of Rs 2.19bn, followed by NIC Asia Bank with Rs 1.72bn and Global IME Bank with Rs 1.7bn. Income tax paid by commercial banks FY 2022/23, Q3 Rs 19.99 billion FY 2021/22, Q3 Rs 21.16 billion FY 2020/21, Q3 Rs 21.91 billion  

The Millennium Challenge Accounts-Nepal (MCA-Nepal) has announced concrete progress in the implementation of the Millennium Challenge Corporation's Nepal Compact program, a US development grant program. The announcement of MCA Nepal, a special purpose vehicle (SPV) established to implement the MCC Compact, has come at a time when Jonathan Brooks, Deputy Vice President of MCC for Europe, Asia, the Pacific, and Latin America, is currently visiting Nepal. According to MCA-Nepal, six bidders have participated in a bidding process to construct the 315 km long transmission line. The bidders, all of whom are Indian contractors, were confirmed after the MCA-Nepal on May 22, opened the bid for the project. Megha Engineering and Infrastructure Ltd, Power Mech Projects Ltd, Kalpataru Power Transmission Ltd, KEC International Ltd, Transrail Lighting Ltd, Tata Projects Ltd, and Larsen & Toubro Ltd participated in the bidding process. MCA-Nepal has said that the minutes of the bid opening with details will be made available on its website soon. “These are companies participating in three separate packages of the transmission lines,” said a source at MCA-Nepal. “Even though the bid was opened for companies from all the world including from the United States and China too, only the Indian companies participated in the bidding process.” It is an important milestone for MCC which was mired in controversy before the MCC-Compact’s ratification by the Nepal’s House of Representatives on Feb 27 last year. The bidders have been confirmed ahead of the compact's entry into force in August this year. According to the MCA-Nepal source, many of the bidders have already worked in Nepal. However, the number of bidders appears to be relatively lower with only six companies participating in all three packages of the contract that include Lapsiphedi-Ratmate-New Hetauda 400kV D/C Transmission Line, Ratmate-New Damauli 400kV D/C Transmission Line, New Damauli-New Butwal 400kV D/C Transmission Line (Base), and New Butwal -Nepal/India Border 400kV D/C Transmission Line. The source said that Brooks visited Nepal to observe the preparatory works before the entry into force of the MCC Compact. With the political environment in the country becoming favorable, MCA-Nepal expects to implement the project without much disturbance. The SPV plans to complete determining the compensation to be paid to the owners of the land for the construction of transmission lines before the implementation date starts in August. The rules of the MCC require the compact to be implemented within five years after the start of the implementation date. Nevertheless, it will not be easier for MCA-Nepal to overcome the possible challenges related to the acquisition of land, a problem constantly appearing in other projects in the country as well. According to the MCA-Nepal source, the SPV also does not expect to complete the acquisition of lands when the implementation of the project begins. “It is impossible to complete land acquisition before the entry into force of the Compact,” the source said. Even MCC’s Deputy Vice-President Brooks had highlighted the importance of land acquisition and forest clearance during his meeting with Deputy Prime Minister and Home Minister Narayan Kaji Shrestha on May 20. “As the project should be completed in five years, Brooks brought up issues like the agreement between Nepal and India on the cross-border transmission line, land acquisition and forest clearance,” the Home Minister's secretariat said in a press statement. As Chief District Officer heads a committee to determine the compensation of the acquired lands and right of way for the transmission line, the US official sought support from the Home Ministry to ease the hurdles, according to Nepali officials. Brooks also met with Finance Minister Prakash Sharan Mahat on Monday. The two officials held extensive discussions on the remaining works to be carried out before implementing the project. Dr. Mahat expressed commitment to completing the project as soon as possible by concluding the important matters in the project cycle by fulfilling due legal procedures as soon as possible. MCA Nepal officials say that the MCC project has not been facing any significant political hurdles after its endorsement by the House of Representatives last year with an interpretative declaration. Deputy Prime Minister Shrestha also promised to implement the project successfully considering that the MCC Compact has already been endorsed by the Nepali parliament.

The Nepal Stock Exchange (NEPSE) gained 51.31 points to close at 1, 942.63 points on Tuesday. Similarly, the sensitive index surged by 8.83 points to close at 367. 72 points. A total of 6,067,432-unit shares of 271 companies were traded for Rs 2. 20 billion. Meanwhile, Kalika Laghubitta Bittiya Sanstha Ltd Kalika Laghubitta Bittiya Sanstha Ltd, Khaptad Laghubitta Bittiya Sanstha Limited and Aatmanirbhar Laghubitta Bittiya Sanstha Limited were the top gainers today, with their price surging by 10. 00 percent. Similarly, Sunrise First Mutual Fund was the top loser as its price fell by 2.00 percent. At the end of the day, total market capitalization stood at Rs 2. 83 trillion.

Despite its promises to reform public enterprises (PEs), the government once again announced that some of the closed state-owned factories would be brought into operation. The government's policies and programs for the fiscal year 2023/24 reads that Hetauda Kapada Udyog, Gorakhkali Rubber Udyog, and Butwal Dhago Udyog be reopened for operation. The government’s announcement to run these defunct companies has come at a time when it has promised reforms of PEs that are using state resources without offering any noticeable benefits for the country and the people. While the government is seeking budgetary support of $200m from the Asian Development Bank (ADB), one of the conditions put forward by the Asian lender is that Nepal needs to commit to reforming PEs. A cabinet meeting on April 18 decided to form a public enterprises recommendation committee headed by former government secretary Shankar Prasad Adhikari. “If the government insists on running the closed state-owned factories without viable plans that require no extra injection of public money, there is the question about whether donors will be happy about the government’s move,” said an expert on public enterprises who chaired a task force on reforming PEs in the past. “It is better to let these companies remain closed if they are not operated commercially and independently outside the government and politicians’ influence,” the expert said, adding that the government has been forced to inject huge amounts of its resources into badly run public enterprises. The government is currently in negotiation with the ADB to secure $200m as the government has a gap in financial resources for its failure to collect enough revenue. The government wants to get funding from multilateral donors in the form of budgetary support which the government can utilize in its prioritized sector. Donors want reforms in PEs and they have been suggesting against recklessly pouring public money into such enterprises. Among the three factories, Hetauda Kapada Udyog, a textiles manufacturer, has remained closed since 2000 after it ran under huge losses and was subsequently liquidated in 2013. It is owned by Industrial District Management Limited. The factory is spread over 8 acres and possesses machines used in making thread, dyeing, and spinning. In fact, a task force headed by Economist Pushkar Bajracharya had even suggested the government let the factory be operated by the Nepal Army to produce necessary clothing items for it. Likewise, Gorakhkali Rubber Udyog, a state-owned tire company, has remained defunct since 2012. The loss-making entity incurred a net loss of Rs 685.5m in the fiscal year 2018/19 while its cumulative losses in the fiscal year 2018/19 amounted to Rs 631.5m, according to the Annual Performance Review of the Public Enterprises 2022 published by the finance ministry. It has the outstanding dues of loans to be paid as of 2018/19 stand at Rs 1.55bn. The factory needs to manufacture radial tires as per the market demands and new plants need to be established if it is operated, according to the annual performance review report. “For this, around Rs 2bn in investment is needed,” it said. According to the report, there had been a discussion about running it by giving it on a lease. Butwal Dhago Karkhana was established in 1983 with the aim of exporting yarn and thread to the international market. The mill started production in 1991, but within a decade its situation deteriorated as the trade union and employees attached to various political parties ran it into the ground with their endless strikes and interference.