Average NPL of finance companies nearly doubles in Q2

The average non-performing loans (NPLs) of finance companies have nearly doubled over the past year. 

A study of second-quarter financial statements of Class ‘C’ finance companies for the fiscal year 2024/25 shows that the average NPLs reached 11.72 percent in mid-Jan this year, up from 6.55 percent in mid-Jan last year. This spike is due to the high non-performing loans of two finance companies—Janaki Finance and Pokhara Finance. While Janaki Finance has an NPL of 40.88 percent, Pokhara Finance has an NPL level of 33.44 percent. 

The NPL levels of four other finance companies have reached double digits. Nine finance companies have single-digit NPL levels, with Gurkhas Finance reporting the lowest NPL of 3.06 percent. 

The second-quarter results show that Janaki Finance and Pokhara Finance are in deep trouble. The accumulated loss of Janaki Finance, which has a paid-up capital of Rs 690m, has reached Rs 969.8m. Similarly, Pokhara Finance, whose paid-up capital is Rs 1.08bn, has an accumulated loss of Rs 1.55bn. 

Other finance companies with high NPL levels include Samriddhi Finance, Reliance Finance, and Central Finance. The NPL level of Samriddhi Finance increased from 4.68 percent in mid-Jan last year to 19.34 percent. Similarly, Reliance Finance’s NPL rose from 9.67 percent to 14.31 percent during the review period. Central Finance also reported a 2.5 percent point increase in its NPL level, reaching 11.94 percent in mid-Jan. 

Likewise, Multipurpose Finance’s NPLs have increased from 1.48 percent to 5.45 percent, while Nepal Finance has managed to slightly decrease its NPL from 10.52 percent to 10.46 percent. While the NPL of Progressive Finance has declined from 11.45 percent to 7.57 percent, Shri Investment Finance and Manjushree Finance saw their NPLs go up from 1.94 percent to 3.71 percent and 3.5 percent to 3.86 percent, respectively.