There has been a significant increase in non-performing loans (NPL) of commercial banks in the first half of the current fiscal year. The financial reports of 21 commercial banks for the second quarter show bad loans of the banks increasing by 116 percent. The average NPL of commercial banks has increased to 2.29 percent in the first half of FY 2022/23 compared to 1.06 percent during the same period of FY 2021/22. Bankers say NPLs have risen mainly due to the non-recovery of debts. As the private sector struggled with rising borrowing rates and a sharp slowdown in market demand, banks have been struggling to recover the loans. The non-payment of loan installment and interest has increased in this fiscal year, according to bankers. Had there been economic activity, it would have been easier for borrowers to pay the debt and interest on time, they say.

The Nepal Rastra Bank implemented the guidelines on working capital loans in mid-October 2022 in order to stop the misuse of credit and control the trend of paying the banks' interest by taking loans. Businessmen and industrialists who used to take loans from banks to pay interest were unable to pay interest after the implementation of working capital loan guidelines which also contributed to the rise in the NPL of banks.

The profits of banks have also been affected by the increment in bad loans as they have to keep aside large amounts of money for the provisioning of bad loans. Provisioning is a practice where banks are required to maintain a certain amount in reserve when loans are not recovered. Of the 21 commercial banks that have published their second quarter report, the Agriculture Development Bank Limited (ADBL) has the highest NPL. The bank's NPL has increased to 4.52 percent by mid-January compared to 2.08 percent during the same period of the last fiscal. The profit of the ADBL has decreased by a whopping 109.06 percent in the first half of the current fiscal. The bank has incurred a loss of 0.128 billion in the first half of FY 2022/23 compared to a profit of 1.42 billion during the same period of FY 2021/22. Himalayan Bank Limited (HBL), Sunrise Bank, Kumari Bank, and Nepal Bank are the other four banks whose NPL is above 3 percent. The HBL's NPL has reached 3.77 percent in the first half of FY 2022/23 compared to 0.72 percent during the same period of FY 2021/22. Sunrise Bank's NPL increased to 3.36 percent in mid-January 2023 from 1.40 percent in mid-January 2022. The NPL of Kumari Bank and Nepal Bank has increased to 3.15 percent and 3.11 percent, respectively. The NPL of Kumari Bank increased mainly due to the merger with NCC Bank. As the NCC Bank had a higher NPL, Kumari Bank's overall bad loan increased after the merger. Rastriya Banijya Bank (RBB) is the only commercial bank that has its NPL decreased in this fiscal year. The government-owned bank has been able to reduce its bad loans by 9.67 percent during the review period. The RBB's NPL has decreased to 2.79 percent in mid-January 2023 from 3.06 percent in mid-January 2022.     NPLs of Commercial Banks

Bank	Mid-Jan, 2023 (in percent)	Mid-Jan, 2022 (in percent)
Agriculture Development Bank	4.52	2.08
Himalayan Bank Limited	3.77	0.72
Sunrise Bank	3.36	1.41
Kumari Bank	3.15	1.06
Nepal Bank Limited	3.11	1.91
Citizens Bank International	2.99	1.87
Nabil Bank	2.98	1.11
Global IME Bank	2.92	1.13
Siddhartha Bank	2.87	0.37
Prime Commercial Bank	2.81	0.78
Rastriya Banijya Bank	2.79	3.06
Civil Bank	2.41	0.94
NMB Bank	2.24	1.49
Prabhu Bank	1.98	1.23
Laxmi Bank	1.56	0.83
Machhapuchhre Bank	1.41	0.57
Sanima Bank	0.77	0.31
Standard Chartered Bank	0.72	0.44
NIC Asia Bank	0.61	0.47
Everest Bank	0.55	0.26
Nepal SBI Bank	0.47	0.14