Submit your Article

The Nepal Stock Exchange (NEPSE) plunged by 24. 59 points to close at 2, 629.08 points on Thursday.

Similarly, the sensitive index dropped by 2. 60 points to close at 449. 89 points.

A total of 29,415,407-unit shares of 314 companies were traded for Rs 11. 23 billion.

Meanwhile, Panchakanya Mai Hydropower Ltd (PMHPL) was the top gainer today with its price surging by 9. 98 percent. Likewise, Pure Energy Limited (PURE) and Rasuwagadhi Hydropower Company Limited (RHPL) were the top losers as its price fell by 10. 00 percent.

At the end of the day, the total market capitalization stood at Rs 4. 37 trillion.

 The non-banking assets (NBA) held by banks and financial institutions have surged by 63.45 percent over the past year, driven by a sharp rise in non-performing loans (NPLs), according to latest data released by Nepal Rastra Bank (NRB).

NBA refers to assets such as collateralized properties acquired by banks when borrowers default. Total NBA, which was Rs 27.6bn in mid-May last year, reached Rs 45.11bn in mid-May—a Rs 17.51bn increase in just one year.

When borrowers default on loan, banks acquire properties pledged with them as collateral. When banks fail to sell off these properties through auction, they are compelled to take them on as assets.

Commercial banks saw a 62.08 percent rise in NBAs over the past year, while development banks and finance companies recorded increases of 55.56 percent and 102.45 percent, respectively. Commercial banks have added Rs 38.48bn in total NBA, while development banks and financial companies have NBA of Rs 3.9bn and Rs 2.72bn, respectively.

Bankers are failing to dispose of repossessed collateral due to a slowdown in real estate transactions. They have been failing to find buyers despite publishing auction notices regularly.

Since banks are required to set aside 100 percent provisioning against such assets, this is tightening liquidity and impacting their profitability as well.

The average NPL ratio across banks and financial institutions also rose by 1.26 percentage points during the review period. The average NPL, which was 3.98 percent in mid-May last year, has now reached 5.24 percent. The steady rise in bad loans forced banks to absorb more collateral which has inflated their NBA portfolios.

Recognizing the strain caused by mounting bad assets, the government, through the budget for the upcoming fiscal year 2025/26, has proposed to establish a ‘bad bank’—a specialized entity to acquire and manage stressed assets from commercial banks.

The move aims at cleaning up balance sheets and improving liquidity and lending capacity in the financial system.
While details of the proposed bad bank’s structure and funding mechanism are yet to be outlined, former governor Maha Prasad Adhikari had instructed officials to start a study for the bad bank.

The price of gold has dropped by Rs 400 per tola in the domestic market on Thursday.

According to the Federation of Nepal Gold and Silver Dealers’ Association, the yellow metal is being traded at Rs 195, 500 per tola today. It was traded at Rs 195, 900 per tola on Wednesday.

Similarly, the price of silver has dropped by 25 and is being traded at Rs 2, 200 per tola today.

With rising water levels in major rivers and accelerated snowmelt following the onset of the monsoon, power generation by hydropower projects in the country is gradually increasing, enabling the country to resume power exports to India and Bangladesh. 

According to Nepal Electricity Authority (NEA), daily exports have now reached 350 MW. Of this, 40 MW is being sent to Bangladesh via India, and the remaining is being exported to various Indian states including Haryana and Bihar. Since Sunday, NEA has been exporting 200 MW and 80 MW, respectively, to the Indian states of Haryana and Bihar. Additionally, it has been supplying up to 30 MW daily to the Indian power exchange market.

Nepal has received permission to export up to 940 MW in total—400 MW under a medium-term bilateral agreement and 540 MW through the Indian Energy Exchange (IEX). Although 125 MW is approved for export to Bihar, only 80 MW is currently being utilized. Similarly, exports to Haryana are expected to increase to the full 235 MW approval in the coming weeks.

NEA plans to resume export of the full 940 MW by the first week of July.

Electricity exports to Bangladesh resumed on Saturday night under a trilateral agreement between Nepal, India and Bangladesh. Nepal is now exporting 40 MW to Bangladesh via the Dhalkebar-Muzaffarpur 400 kV transmission line. The electricity is sourced from Trishuli and Chilime hydropower projects. NEA estimates this export will generate monthly revenue of Rs 250m for Nepal, or Rs 1.25bn over five months.

Nepal, India and Bangladesh signed a tripartite agreement for power exports to Bangladesh in October last year. To begin with, Nepal is exporting 40 MW. Bangladesh has expressed interest to develop a reservoir-type power plant in Nepal in partnership with Nepal for a long-term energy partnership.

Unlike Nepal-India energy trade, which is settled in Indian currency, Bangladesh is paying Nepal in US dollars. The cost per unit is 6.4 cents. Bangladesh also bears the transmission loss and costs incurred within India, while NEA covers the losses within Nepal.

In the first five months of 2024-25, Nepal exported electricity worth Rs 13.4bn to India.

Although Nepal has a total installed capacity of 3,602 MW, actual generation stands at around 2,300 MW right now. Domestic demand hovers around 1,900 MW.