NRB Rejects Financial Reports of Eight Commercial Banks, Cites Concerns Over Accuracy

KATHMANDU, Nov 13: Nepal Rastra Bank (NRB) has expressed dissatisfaction with the financial reports submitted by commercial banks for the fiscal year 2024/25, citing possible manipulation and non-compliance with regulatory requirements.

So far, the central bank has approved only eight out of 20 commercial banks to hold their annual general meetings (AGMs). Among them, three banks have already completed their AGMs, according to NRB officials.

Commercial banks and financial institutions (BFIs) are required to conclude their AGMs for the previous fiscal year by mid-January, marking the end of the second quarter of the current year. However, 16 banks have sought final approval from the central bank, and most are still awaiting clearance.

NRB sources said the central bank found that several banks had failed to allocate the mandatory amounts for loan loss provisioning, a key financial safety measure. The regulator has maintained a zero-tolerance policy regarding provisioning shortfalls.

Under NRB regulations, BFIs must maintain provisions ranging from 1 to 100 percent on their outstanding loans, depending on the delay in loan repayments. The longer the delay, the higher the provisioning requirement. Once loans are repaid, banks can write back the provisioned amounts and include them in profits distributable to shareholders.

As of the first quarter of FY 2024/25, the average non-performing loan (NPL) ratio of commercial banks has climbed to 4.86 percent, up from 4.04 percent a year earlier. Banks have reportedly set aside an additional Rs 11 billion in provisions this year in compliance with NRB norms.

Despite these allocations, the central bank remains unconvinced by several banks’ financial disclosures. NRB officials noted inconsistencies in reporting, particularly regarding provisioning and non-banking assets.

During the last fiscal year, the total non-banking assets of commercial banks rose by Rs 15 billion, reaching Rs 50.55 billion. Yet, the regulator continues to question the reliability of financial statements submitted by multiple banks.

Preliminary, unaudited reports had shown that 16 commercial banks were financially sound enough to distribute dividends to shareholders. However, following NRB’s ongoing scrutiny, that number is expected to decline.