Kathmandu -Commercial banks are burdened by rising bad loans. The second quarterly report of the current fiscal year shows a significant increase in non-performing loans (NPLs) across banks.  

Despite some improvement in profits through increased loan recovery, banks have been unable to expand new lending, negatively affecting their balance sheets. The NPL ratio of many banks has risen sharply.  

Some banks now report NPLs of around 7 percent. In the previous quarter, most banks kept their NPLs within 4 percent, but these have now climbed above 5 percent.  

Banks with 5 percent NPLs in the first quarter of the current fiscal year have shown no improvement in the second quarter. In fact, the situation has worsened.  

The rise in bad loans has increased distributable losses, directly impacting capital reserves. Some banks' core capital ratios have dropped to around 7.23 percent.  

Although banks have shown net profits by reducing impairment charges, the second-quarter financial reports of most banks remain disappointing.  

Himalayan Bank reported a net profit of Rs 1.51 billion in the second quarter of the current fiscal year. However, its NPL ratio increased to 4.98 percent from 4.95 percent in the same period last year. The bank reported a distributable loss of Rs 3.95 billion during this period, compared to Rs 4.52 billion in the previous year.  

NMB Bank, which has not distributed dividends for two years, showed some improvement in financial indicators. Although its net profit grew by 68.69 percent in the second quarter, its NPL ratio increased to 3.96 percent.  

In contrast, Everest Bank continued its strong financial performance. The bank increased its net profit by 21 percent to Rs 2.07 billion, reduced its NPL ratio from 0.77 percent to 0.66 percent, and raised its distributable profit from Rs 2.40 billion to Rs 2.71 billion.  

Global IME Bank made efforts to improve its financial standing through increased loan recovery. The bank's net profit rose by 49.5 percent to Rs 2.64 billion. However, its NPL ratio increased slightly from 4.68 percent in the second quarter of the previous year to 4.86 percent in the current year.  

Prabhu Bank, despite increasing its net profit, faced growing distributable losses and a higher NPL ratio, now at 5.06 percent. The bank reported a distributable loss of Rs 33.3 billion.  

Kumari Bank's situation has deteriorated further. Its NPL ratio climbed to 6.96 percent, while net profit was limited to around Rs 280 million. The bank’s distributable loss increased to Rs 6.43 billion, and its Tier 1 capital ratio dropped to 7.23 percent.  

NIC Asia Bank is in a similar position, with a net profit of Rs 150 million and an NPL ratio close to 5 percent. The bank's distributable loss has risen to Rs 2.65 billion.  

Nepal Investment Mega Bank reported a net profit of Rs 2.83 billion in the second quarter but faced a distributable loss of Rs 2.86 billion. Its NPL ratio has increased to 5.86 percent, from above 5 percent in the first quarter.  

Nepal Bank Limited reported a net profit of Rs 100 million in the second quarter, a significant drop from the previous year. Its NPL ratio rose to 4.99 percent from 4.50 percent, while distributable profit improved slightly to Rs 607 million, compared to a distributable loss of Rs 569 million in the same period last year.