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#NepalBanking #CapitalAdequacy
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By Sandeep Chaudhary

Are Nepali Banks Well-Capitalized? Mid-July 2025 Data Insights

Are Nepali Banks Well-Capitalized? Mid-July 2025 Data Insights

The Nepal Rastra Bank’s provisional data shows that Nepal’s commercial banks as a whole are maintaining healthy capital positions, but with some variation across institutions. The sector-wide Capital Adequacy Ratio (CAR) is 12.78%, and the Core Capital Adequacy Ratio (CCAR) is 10.03%, both above the regulatory minimums. This indicates that overall, Nepali banks are well-capitalized, with sufficient capital to absorb risks and comply with Basel-style prudential norms.

Among individual banks, Standard Chartered Bank Nepal stands out with the highest CAR of 17.82% and CCAR of 15.80%, reflecting its conservative lending model and robust equity base. Other strong performers include Prabhu Bank (CAR 13.90%), Nepal Investment Mega Bank (13.73%), NIC Asia Bank (13.42%), and Agriculture Development Bank (13.36%). These banks are comfortably capitalized, providing strong buffers against credit and market risks.

On the other hand, several banks operate closer to the minimum requirements. Rastriya Banijya Bank (CAR 11.84%, CCAR 9.46%) and Himalayan Bank (CAR 11.16%, CCAR 8.31%) maintain thinner cushions, leaving less room to absorb unexpected shocks. Similarly, Prime Commercial Bank (CAR 11.74%) and Siddhartha Bank (11.77%) are near the lower range of capital adequacy. While still compliant, their smaller buffers highlight the importance of careful risk management and earnings retention.

The three state-owned banks—Nepal Bank, Rastriya Banijya Bank, and Agriculture Development Bank—collectively have a CAR of 12.70% and CCAR of 10.45%, slightly above the sector average. They remain stable and systemically important, though not among the strongest in terms of excess capital.

At the same time, sectoral risks persist. The average non-performing loan (NPL) ratio is 4.44%, and although net NPLs stand at just 1.05% after provisioning, any deterioration in asset quality could put pressure on capital. In addition, profitability margins are tightening, with spread rates at 3.66%, which could limit banks’ ability to grow retained earnings and strengthen capital further.

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