Nepali Banking Sector Shows Signs of Recovery, ICRA Nepal Report Indicates
Summary
ICRA Nepal’s latest report says the Nepali banking sector is gradually recovering as loan demand picks up, interest rates fall and borrower stress eases. But high non-performing loans, weak capital adequacy and excess liquidity are still weighing on banks.
Key Points
- ICRA Nepal’s report says the banking sector has passed its worst phase, with loan growth returning and borrower conditions improving.
- Commercial banks still face elevated non-performing loans, tight capital adequacy and large loan-loss provisions.
- Excess liquidity has pushed down deposit and lending rates, while weak credit demand and low government bond yields are squeezing banks’ returns.
- The working capital loan directive, real estate sluggishness and the cooperative crisis have all contributed to stress in the financial system.
