Nepal Rastra Bank (NRB) has shortlisted six audit forms for Extensive Asset Quality Review (Loan Portfolio Review) of 10 commercial banks of the country. The shortlisted companies include audit firms from Sri Lanka, India, Bangladesh and Nepal.
According to a notice from the NRB, Deloitte Partners from Sri Lanka, Howladar Yunus & Co from Bangladesh, and KPMG Assurance & Consulting Services and MSKA & Associates from India have been shortlisted for the loan portfolio review of 10 Nepali commercial banks. Proposals from three venture entities have also been shortlisted. They include Subedi & Associates of Nepal, and Mehra Goel & Co and JKSS & Associates of India; and BK Agrawal of Nepal and SR Batliboi & Associates.
Subedi & Associates is the lead partner in the joint venture of three firms.
The NRB is selecting an international audit firm for loan quality review as per a condition set by the International Monetary Fund (IMF) while approving the Extended Credit Facility (ECF) for Nepal. Expressing concerns over the quality of loans disbursed by major banks, the potential risks associated with non-performing assets (NPAs) and the overall impact on the country’s financial stability, the IMF had set assessment of loan quality of major Nepali banks as a condition for its support.
This is the second time that the NRB initiated the process of procuring the service of international audit firms for the loan portfolio review of 10 major banks. In March last year, NRB invited proposals from foreign audit consultancies. Out of five firms shortlisted at that time, only KPMG India was selected for the financial proposal round. But after KPMG submitted a proposal with costs exceeding the estimated budget, NRB canceled the entire process.
The assessment was supposed to begin by April 2024 and be completed by Dec 2024, with a corrective action plan to be implemented from Feb 2025 based on the findings.
After the IMF expressed concern over the delay, the NRB reissued the call for proposals in December. The central bank has also revised the qualification criteria for the selection process. The minimum score required for qualification of the proposal has been reduced from 70 to 60. The evaluation criteria include 50 percent for qualifications, 40 percent for experience and 10 percent for capability.
Ten commercial banks with highest credit disbursement as of the last fiscal year (mid-July) will have their loan portfolio assessed by the selected audit firm. They include Global IME, Nabil Bank, Nepal Investment Mega Bank, Kumari Bank, NIC Asia Bank, Laxmi Sunrise Bank, Rastriya Banijya Bank, Himalayan Bank, Prabhu Bank Agricultural Development Bank.
These banks had disbursed a total of Rs 2,896bn in loans as of mid-July last year.
