Kathmandu. Top 20 commercial banks non-performing loan (NPL) ratio across  to 5.64% by mid-October in the first quarter of fiscal year 2026/27 (Q1 FY 2083/84), up from 4.86% in the same period last year.

Prabhu Bank recorded the highest NPL ratio at 14.80%, up from 5.78% a year earlier, an increase of 9.02 percentage points. NIC Asia Bank followed with an NPL ratio of 9.81%, compared with 6.99% a year ago.

Nepal Investment Mega Bank reported an NPL ratio of 8.87%, up from 6.63%, while Kumari Bank's ratio increased to 8.72% from 6.98%.

The deterioration in asset quality comes despite a significant improvement in banks' reported profitability, highlighting the contrast between rising credit risks and higher accounting profits. OpenBank Account

The 20 commercial banks collectively earned Rs 19.15 billion in net profit in the first quarter, up 45.59% from Rs 13.15 billion in the same period last fiscal year.

Banks' combined net interest income increased by just 0.97% to Rs 49.68 billion from Rs 49.20 billion a year earlier. In contrast, impairment charges set aside against potential loan losses fell by 44.9% to Rs 11.09 billion from Rs 20.14 billion.

Decreasing provisioning requirements following loan recoveries and the release of previously set-aside amounts helped boost reported profits.

Devendra Raman Khanal, chief executive officer of Rastriya Banijya Bank, said banks' business expansion remained modest, but recoveries of previously troubled loans had helped reduce provisioning requirements. GetCash AdvancesBanking expert Pashuram Kunwar Chhetri also attributed the increase in profits to lower impairment charges amid sluggish credit expansion and improved loan recovery.

The combined distributable profit of commercial banks stood at negative Rs 9.08 billion in the first quarter, despite their aggregate net profit of Rs 19.15 billion. OpenBank Account

Five of the 20 banks reported negative distributable profits, dragging the sector-wide figure into negative territory.

Distributable profit differs from net profit because banks must first allocate earnings to statutory reserves and other funds and make adjustments required by Nepal Rastra Bank.

Banks may recognize accrued interest as income when calculating net profit, but must deduct interest yet to be recovered when calculating distributable profit. Regulatory adjustments and provisions for potential losses further affect the amount available for distribution.

Prabhu Bank Limited: ~14.80% (Highest NPL in the sector)
NIC Asia Bank Limited: ~9.81%
Nepal Investment Mega Bank Limited (NIMB): ~8.87%
Kumari Bank Limited: ~8.72%
Himalayan Bank Limited: ~7.68% (recent Q3/Q4 baseline around 7.28%–7.96%)
Citizens Bank International Limited: ~6.82%
Prime Commercial Bank Limited: ~6.39%
Laxmi Sunrise Bank Limited: ~5.29%
Agricultural Development Bank Limited (ADBL): ~5.06%
Nepal Bank Limited: ~4.96%
NMB Bank Limited: ~4.95%
Rastriya Banijya Bank Limited: ~4.48%
Nabil Bank Limited: ~4.37%
Machhapuchchhre Bank Limited: ~4.01%
Sanima Bank Limited: ~3.99%
Siddhartha Bank Limited: ~3.71%
Nepal SBI Bank Limited: ~2.53%
Standard Chartered Bank Nepal Limited: ~1.81%
Everest Bank Limited: ~0.50% (Lowest NPL in the industry)
Global IME Bank Limited: ~4.97% (