Banking Khabar/ In recent years, Nepal’s financial market has been under continuous pressure. Particularly, development banks have been further deteriorating as they lose the trust of investors and depositors. Some time ago, the Karnali Development Bank scandal further eroded public confidence in development banks. The main challenge for development banks is the contraction in loan disbursement. Development banks have not been able to mobilize loans effectively. On the other hand, the share prices of most development banks listed on the Nepal Stock Exchange (NEPSE) have been continuously declining.
Some banks, despite disbursing loans at interest rates of 14–15 percent, have been unable to recover those loans, which has led to a surge in non-banking loans. This has created further pressure on the financial health of the banks. Development banks have been trapped between commercial banks and microfinance institutions. As large commercial banks have expanded their branches even in rural areas, the existence of development banks has come under deeper crisis.
Meanwhile, microfinance institutions have been providing cheap and efficient services in rural areas, causing development banks to lose their traditional market. Nepal Rastra Bank’s pressure on capital increment, mergers, and acquisitions has further made development banks uncomfortable. Development banks unable to raise sufficient capital are struggling to survive.
Condition of Some Development Banks
At the end of FY 2080/81, the average non-performing loans (NPLs) of development banks stood at 6.65 percent, which increased to 8.46 percent in the last fiscal year 2081/82. Within a year, this represents a rise of 1.81 percent. In FY 2078/79, the NPL of development banks was only 2.06 percent. In FY 2079/80, it rose to 4.58 percent. Similarly, in FY 2080/81, the growth of NPLs accelerated, reaching 6.65 percent. In the last fiscal year 2081/82, it further increased to 8.46 percent.
Development Banks with High NPLs
Narayani Development Bank
Among development banks, Narayani Development Bank’s non-performing loans have skyrocketed. In the last fiscal year, its NPLs exceeded 50 percent. In FY 2078/79, it was only 2.94 percent. In 2079/80, it reached 18.4 percent. By FY 2080/81, the NPL nearly doubled to 35.21 percent, and in 2081/82, it increased further to 50.97 percent. This sharp rise in NPLs has affected its net profit. The net profit declined by NPR 17.8 million in FY 2080/81, while in FY 2081/82, it decreased by NPR 25.1 million. Compared to the previous fiscal year, this is a 41.40 percent decline.
Corporate Development Bank
Among banks with high bad loans, Corporate Development Bank’s NPLs have increased significantly. In the last fiscal year, its NPLs rose to 12.38 percent, which is more than double compared to 5.91 percent in the previous fiscal year. Earlier, in FY 2079/80, the NPL was 4.29 percent and in 2078/79, it was 4.65 percent. Rising NPLs have also negatively affected the bank’s profit. In the last fiscal year, the bank’s profit declined by NPR 16.3 million. While the net profit had increased by NPR 20 million in the previous fiscal year, it fell by 181.15 percent this year.
Jyoti Development Bank
Jyoti Development Bank’s NPL reached 7.98 percent, which is significantly higher compared to 4.95 percent in the previous fiscal year. In 2078/79, the NPL was 1.42 percent; in 2079/80, 3.09 percent; and in 2080/81, 4.95 percent. Likewise, while the bank had earned a net profit of NPR 170.5 million in the previous fiscal year, it experienced a decline of 92.74 percent in net profit during the last fiscal year.
Excel Development Bank
Excel Development Bank also has a high level of non-performing loans. In FY 2081/82, NPLs reached 6.71 percent, slightly higher than 6.18 percent in the previous year. Earlier, in 2078/79, it was 2.79 percent, and in 2079/80, it was 4.88 percent. A slight decline in profit was observed. The net profit, which was NPR 43.4 million in the previous fiscal year, fell to NPR 40.9 million in the last fiscal year, a decline of 5.96 percent.
Sangrila Development Bank
Sangrila Development Bank’s NPLs have been continuously rising. In the last fiscal year, NPLs reached 5.64 percent, compared to 4.08 percent in the previous fiscal year. In FY 2078/79, bad loans were 0.98 percent, and in 2079/80, they increased to 3.06 percent. However, the bank’s net profit has increased. In FY 2080/81, the net profit was NPR 504.2 million, which increased to NPR 537 million in FY 2081/82, representing a 6.51 percent rise.
Mahalaxmi Development Bank
Mahalaxmi Development Bank’s NPLs reached 4.86 percent in the last fiscal year, higher than 4.58 percent in the previous year. In FY 2078/79, it was 2.95 percent, which rose to 6.51 percent in 2079/80. A slight growth in profit was observed. In FY 2080/81, the profit stood at NPR 500.3 million, which increased to NPR 506.6 million in 2081/82, a growth of 1.26 percent.
Lumbini Development Bank
Lumbini Development Bank’s NPLs reached 4.55 percent, higher than 3.29 percent in the previous year. In FY 2078/79, it was 1.68 percent, which rose to 3.01 percent in 2079/80. Its profit, however, saw a significant decline. In the previous fiscal year, the bank earned a net profit of NPR 543.6 million, but it decreased to NPR 379.8 million in the last fiscal year, a drop of 30.13 percent.
Shine Resunga Development Bank
Shine Resunga Development Bank’s NPLs reached 4.24 percent, higher than 3.43 percent in the previous fiscal year. In FY 2078/79, the NPL was 0.96 percent, and in 2079/80, it was 1.81 percent. The bank’s net profit has slightly increased. In FY 2080/81, the net profit stood at NPR 685.3 million, which rose to NPR 688.6 million in FY 2081/82, reflecting a 0.48 percent increase.
