Bankers attribute the rise in NPL 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.
According to Sanima Bank CEO Nischal Raj Pandey, the rise in NPLs is basically due to the chain impacts of the economic downturn. "The cash flow in the market has been affected severely. In addition, the demand for goods and services has also declined dramatically," said Pandey. Besides, the government's inability to pay billions of rupees it owes to the contractors has added problems, according to Pandey. He says that borrowers related to the construction sector have not been able to repay their loans. "With the slowdown in the real estate and stock market, common people's investments have gotten trapped," said Pandey. With the sharp rise in NPLs, the loan loss provisions of banks have also increased. As per the unaudited financial reports for the third quarter of banks, the amount for provisioning has increased by 341 percent. Banks have set aside Rs 30.86 billion for loan loss provisions till mid-April 2023 compared to Rs 7 billion during the same period of the last fiscal year. The total provisioning amount of banks increased by Rs 23.86 billion in the last 12 months. Among the commercial banks, NPLs of three banks crossed 4 percent. Himalayan Bank has the highest NPL of 4.56 percent, followed by the Agricultural Development Bank with 4.35 percent, and Nepal Bank with 4.16 percent. Four banks have managed to keep their NPL below 1 percent. Nepal SBI Bank, Standard Chartered Bank Nepal, NIC Asia Bank, and Everest Bank have less than 1 percent NPL. SBI's NPL stood at 0.97 percent, Standard Chartered’s at 0.90 percent, NIC Asia's at 0.85 percent, and Everest's at 0.70 percent. The rise in NPL levels and provisioning amount has hit the commercial banks' profit in the current fiscal year. The profit of banks surged by 11.68 percent to Rs 48.70 billion by the third quarter of this fiscal. The banks' profit stood at Rs 43.61 billion during the same period of the last fiscal year. Among the commercial banks, Nabil Bank posted the highest profit of Rs 5.11 billion in the third quarter of the current fiscal year. The Global IM Bank is at number two with a profit of Rs 4.35 billion followed by NIC Asia with Rs 4.01 billion. Banks' NPL
| Name of Bank | NPL (mid-April 2023) |
| Himalayan Bank | 4.56% |
| Agricultural Development Bank | 4.35% |
| Nepal Bank | 4.16% |
| Citizens Bank | 3.98% |
| Kumari Bank | 3.97% |
| Global IME bank | 3.96% |
| Siddhartha Bank | 3.95% |
| Nepal Investment Bank | 3.94% |
| Rastriya Banijya Bank | 3.88% |
| Nabil Bank | 3.87% |
| Sunrise Bank | 3.62% |
| Prabhu Bank | 3.48% |
| Prime Bank | 3.06% |
| NMB Bank | 2.96% |
| Machhapuchhre Bank | 2.37% |
| Sanima Bank | 2.27% |
| Laxmi Bank | 1.82% |
| Nepal SBI Bank | 0.97% |
| Standard Chartered | 0.9% |
| NIC Asia Bank | 0.85% |
| Everest Bank | 0.7% |
