Non-Performing Loans in Nepal Which Banks Are Struggling?

Based on NRB’s Key Financial Indicators (Asadh end, 2082 / Mid-July 2025), the state of Non-Performing Loans (NPLs) across Nepali commercial banks reveals which institutions are under the most stress in asset quality. The sector average NPL ratio stands at 3.66%, but several banks are struggling with much higher levels, signaling challenges in loan recovery and risk management.

Among the government-owned banks, Nepal Bank (5.58%), Rastriya Banijya Bank (4.78%), and Agriculture Development Bank (5.61%) all have above-average NPL ratios, reflecting their legacy exposure to rural credit, government-directed lending, and weaker recovery mechanisms. This trend underlines the higher systemic risks in state banks, despite their large deposit base and government backing.

In the private sector, NIC Asia (7.04%) stands out with the highest NPL ratio among all banks, showing significant stress in managing its aggressive loan portfolio. Prabhu Bank (6.67%) and Laxmi Sunrise (6.49%) also report high NPLs, suggesting rising asset quality pressure in banks that expanded lending aggressively in recent years. Other mid-tier private banks like Machhapuchhre (6.25%), Citizens (6.25%), and Siddhartha (6.42%) also report elevated NPLs.

Conversely, some banks are performing far better in maintaining healthy loan books. Standard Chartered (4.96%), Everest Bank (5.36%), and Nabil Bank (5.71%) are slightly above average but manageable. Meanwhile, Nepal SBI (6.21%) shows a rising but still controlled level of stress. These banks’ foreign linkages, conservative lending, and diversified borrower bases help mitigate risks to some extent.

The data clearly shows that both government and private banks are struggling with asset quality, though for different reasons. Government banks face structural and policy-driven lending risks, while private banks are being tested by rapid credit growth and competitive lending strategies. For depositors, higher NPL ratios may imply riskier asset books, though capital buffers still provide safety. For investors, banks with lower NPLs (such as Standard Chartered or Nabil) are more attractive in terms of stability, while high-NPL banks may need to provision heavily, cutting into profits.