Comparing NPL Ratios State-Owned vs Private Banks

When comparing Non-Performing Loan (NPL) ratios of state-owned vs private banks in Nepal (NRB mid-July 2025 data), a very interesting picture emerges. Traditionally, state-owned banks were considered riskier due to weak governance, political interference, and legacy bad loans. However, the latest data shows a reversal of this trend.

• State-Owned Banks (Nepal Bank, Rastriya Banijya Bank, ADBL):
  These three hold a combined loan portfolio of Rs. 7.61 trillion, yet their average NPL ratio is just 3.87%, with individual performances even better. Nepal Bank’s NPL is 0.79%, RBB’s is 0.88%, and ADBL’s is 0.42% – all comfortably below the sector average of 3.66%. This signals effective loan recovery, stricter oversight, and better provisioning in recent years.

• Private Banks:
  In contrast, many private sector banks that expanded aggressively in recent years are now showing higher NPL burdens. For instance, NIC Asia (6.28%), Siddhartha Bank (2.62%), Machhapuchhre (3.83%), and others are struggling to maintain asset quality. Even large players like Global IME (4.87%) and Prabhu Bank (4.96%) face above-average NPLs, reflecting the risks of rapid credit growth in sectors hit by economic slowdown and liquidity stress.

The comparison clearly shows that state-owned banks now appear more stable in terms of loan quality, while private banks carry the bigger risks. For depositors, this means that the long-held perception of state banks being unsafe is outdated. For investors, however, private banks may still offer higher returns, but the risk premium is rising due to weaker loan books.