The direct impact of economic activity being unable to run has been seen in the third quarter financial statements of banks and financial institutions. Experts say that indicators such as decrease in profit of most banks and financial institutions, failure to increase credit expansion, increase in bad loans, decrease in net interest income, decrease in return on assets (ROE) also confirm the effect of the sluggish economy in the quarterly financial statements.

According to the financial report of the third quarter of the current financial year released by the 20 commercial banks in operation on Sunday, the average bad loans of the banks is 4.83 percent. Compared to the second quarter of the current financial year 2081/82 and the third quarter of the previous financial year, the bad loans of the banks have generally increased. Banks' bad loans averaged 4.49 percent as of last December and 3.65 percent in the third quarter of last financial year. 

Even though there was no big increase in the average bad loans of banks until last December, many banks individually have bad loans above 5 percent. According to the instructions of the National Bank, the banks should keep the average bad loans within 5 percent. Although the bad loans started to increase continuously in the last quarter, it seems that the National Bank turned a blind eye when the banks published more than five percent. 

According to the financial statements of the banks, 9 of the 20 commercial banks in operation have bad loans of more than 5 percent. Bad loans of 17 banks are more than 4 percent while Everest Bank has the lowest at only 0.64 percent. Standard Chartered Bank's bad loans are 1.44 percent and Sanima Bank's is 3.42 percent. Himalayan Bank's bad loans are the highest at 7.68 percent, while Citizens, Kumari, Lakshmi Sunrise, Nepal, Investment Mega, NIC Asia, Prabhu and Prime Bank have published more than five percent bad loans. 

Overall, the bad loans of 17 banks increased at a high rate, but the bad loans of three banks (Standard Chartered, Everest and Sanima) were very low, so it was seen less on average.

"It is only bad loans that are shown, banks hide many bad loans (shown as good)," said the chief executive officer of a commercial bank, "That's why banks are in a really scary situation." If there is no improvement in loan recovery even in the next few months, it seems that many banks will face difficulties.' 

The profitability of banks has also been affected due to the increase in bad loans and the decline in net interest income, the mainstay of the business. Compared to the third quarter of last financial year 2080/81, the net profit of commercial banks increased by only 1.40 percent during the same period of the current financial year. As of last March, 20 commercial banks have earned a total of 41 billion 25 crore net profit (profit after tax). 

In the third quarter of last year, the total profit of banks was 40 billion 68 million rupees. The profits of Kumari, Citizens, NIC Asia, Himalayan, Standard Chartered, Siddharth, Prime Commercial and Krishi Bikas Bank have decreased till the third quarter of the current financial year. During this period, Nepal Bank has the highest profit increase. Due to the write-back of the previous bad loan, the profit growth rate of Nepal Bank has been seen to be high. 

Banks are still under a lot of pressure, said Anil Sharma, Executive Director of Nepal Bankers Association. "Compared to the previous month, the bad loans of the banks have increased by a lot, and the bank had to set aside a lot of money to cover the losses," he said, "Profits have not increased compared to the increase in loans."