Commercial bank profits increased by around 20pc in fiscal year 2020/21 – myRepublica

KATHMANDU, Aug 20: Profits made by the 27 commercial banks in the last fiscal year soared by 19.31%, supported by flexible monetary policy and banks’ profits from stock trading amid the impacts of the COVID-19 pandemic.

According to the Nepal Bankers Association (NBA), banks made a profit of Rs 63 billion in 2020/21 compared to Rs 52.80 billion in 2019/20.

However, net interest income only increased by 2.45% due to the reduction in the interest rate on loans and the low spread rate margin. According to NBA President Bhuvan Dahal, the majority of banks maintained a spread of just 3.62%, although the central bank capped it at 4.4%.

During the period, the collection of deposits by these banks increased by 21% and loan amounts jumped by 28%. Distributable profit increased by 35.41% to reach Rs 47.34 billion. Along with rising profits, the average rate of return for banks rose to 14.90%.

At a time when most businesses were hit hard by the pandemic, banks were able to boost their profits through stock trading. Nepal Rastra Bank, through monetary policy last year, had asked banks to offload their investments in shares of other financial institutions by mid-June.

Experts said banks have also benefited from an impact of expansionary monetary policy, which has helped banks inject additional Rs 800 billion in loans. However, more of the amount was invested in non-performing and short-term loans, including real estate, margin loans and import businesses.

Out of the total profit, Nabil Bank pocketed the biggest share of Rs 4.50 billion representing a growth of 30.06% in the bank’s profits. Global IME Bank made a profit of Rs 4.12 billion and ranked second, followed by Rastriya Banijya Bank (Rs 3.79 billion), Agriculture Development Bank (Rs 3.69 billion) and Nepal Investment Bank Limited (Rs 3.65 billion). The other banks also made good profits.

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