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Started 2 weeks ago · Updated 1 week ago

Nepal Rastra Bank Approves Loan Portfolio Review, Prepares Directives for Banks

The board of Nepal Rastra Bank has approved a loan portfolio review report for the country's 10 largest commercial banks, which identified significant deficiencies in lending practices. The central bank is now preparing to issue institution-specific directives to address issues such as increased non-performing loans (NPLs) and irregularities in loan classification and governance.

  • The independent review, conducted by Bangladesh-based Howladar Yunus & Co. as part of an IMF agreement, found actual bad loans to be over 7.7 percent, significantly higher than the publicly reported 5.5 percent.
  • Three commercial banks reportedly exceeded the 10 percent NPL threshold, prompting regulators to prepare corrective instructions.
  • The review uncovered concerns regarding loan evergreening, improper loan classification, and questionable valuation practices.
  • Banks may be required to make additional loan-loss provisions if they cannot justify discrepancies identified in the report.
  • The report will be forwarded to the Bank Supervision Department for formal communication with the concerned banks, seeking explanations and corrective measures.

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International Monetary Fund Nepal Rastra Bank Howladar Yunus & Co.

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