NRB Selects Bangladesh’s Howladar Yunus & Co. for Loan Portfolio Review of Nepal’s Top 10 Banks

Nepal Rastra Bank (NRB) has resumed the process of conducting a loan portfolio review of the country’s top 10 commercial banks, selecting Howladar Yunus & Co., a renowned auditing firm from Bangladesh, as the external auditor.

This move follows Nepal’s commitment made during its Extended Credit Facility (ECF) agreement with the International Monetary Fund (IMF). Under this agreement, the Government of Nepal and NRB had agreed to have an international audit conducted for the top 10 commercial banks with the highest credit exposure.

Earlier in February, NRB shortlisted six auditing firms from countries including Sri Lanka, India, and Bangladesh. Following a technical evaluation, NRB’s Asset and Service Management Department selected Howladar Yunus & Co. as the most suitable firm. The selected firm has been given a deadline of June 7 (25th Jestha) to submit its financial proposal.

This selection comes after the disqualification of a previous Indian firm, KPMG Assurance and Consulting Services, whose proposal was rejected, leading NRB to restart the process.

The IMF has flagged multiple concerns about Nepal’s banking sector, including:

• Questionable classification of non-performing loans (NPLs)

• Weak collateral valuation practices

• Lack of financial discipline

• Loan evergreening practices (issuing new loans to repay old ones)

Such practices, if unaddressed, could pose systemic risks to the financial system. The IMF and World Bank have expressed fears that some banks may be hiding bad loans and concentrating credit in a few business groups. There are also concerns about whether collateral backing the loans is adequate.

The loan portfolio review is a key condition set by the IMF under the $395 million ECF deal signed in December 2021. The IMF agreed to disburse the loan in seven tranches over 38 months. So far, Nepal has received five installments of the ECF.

The remaining $87.09 million (approx. NPR 11.93 billion) will be disbursed only after Nepal fulfills this auditing requirement. The IMF also suggested amending the NRB Act to legally prioritize external auditing of the banking sector.

This audit aims to bring greater transparency, accountability, and international standard compliance in Nepal’s banking sector. By hiring an independent international auditor, NRB hopes to assess actual credit risk exposure and strengthen confidence in the country’s financial system—both for the public and global partners.