Most banks and financial institutions have not been able to pay the principal and interest that were due by mid-October. According to the agreement between the bank and the borrower, the borrower is supposed to pay the installments and interest as specified in the first quarter of the fiscal year. However, since most borrowers do not pay, banks and financial institutions are currently under pressure to report bad financial statements for the first quarter.

If the principal and interest are not recovered within the stipulated time, it is converted into a non-performing loan based on the period of overdue. As the period of overdue increases, banks have to make more provisions for bad loans on that loan. On the one hand, the bank's bad loans increase, and on the other hand, profits decrease because they have to make provisions for losses. Banks and financial institutions are currently under this pressure.

On the one hand, there is pressure on banks and financial institutions to increase profits and distribute more dividends, and on the other hand, they will have to recover non-performing loans and return the amount of provisions for bad loans made earlier. But bankers say that both the aforementioned tasks cannot be done properly at present. Santosh Koirala, President of the Nepal Bankers Association, said that the interest recovery could not be done as expected in mid-Asoj as the income of the borrowers was affected by the Gen-G movement on 23 Asoj and the loss of public money during the protests on 24 Asoj, and the political instability that followed.

He said that although it is natural for many borrowers to not pay interest due to circumstances, it is a dangerous situation for those who can. ‘Since it was seen that much interest could not be recovered by mid-Asoj, the Nepal Bankers Association had requested the Rastra Bank to extend the deadline for paying principal and interest and publishing financial statements,’ he said. ‘Even if the Rastra Bank does not extend the deadline for paying principal and interest, the interest accrued up to Kartik 15 can be included in the financial statements of the first quarter itself and the financial statements have been published until Kartik 21.’ 

Although such a provision has provided some relief to banks and borrowers, there is a strong possibility that bad loans will increase in the financial statements of the first quarter of banks and profits will decrease, said Chairman Koirala. Based on the conclusion that many loans have not paid the principal and interest due by mid-Asoj due to the situation created after the Gen-G movement, the umbrella organizations of banks and financial institutions had demanded an extension of the time for collecting interest and publishing financial statements. At the request of banks and financial institutions, the National Bank issued a circular on October 31, allowing banks and financial institutions to include interest earned up to October 15 in their financial statements for the first quarter. Under normal circumstances, banks and financial institutions could only include interest earned up to mid-October in their financial statements for the first quarter. 

‘According to the accounting policies of banks and financial institutions, the National Bank has asked that an amount equal to the interest income received up to the first quarter of the fiscal year 2082/83, other than the interest earned within October 15, 2082, be deducted from the income tax and employee bonus as per the prevailing provisions and the amount deposited in the statutory fund (general reserve fund and corporate social responsibility fund). The National Bank has also directed that the remaining amount be spent as retained profit and deposited in the regulatory fund. Banks and financial institutions have been given an additional 7 days to publish their financial statements for the first quarter. Under normal circumstances, banks were required to publish their first-quarter financial statements by 15 Kartik. Now, the National Bank has extended the publication of financial statements by one week. 

By the end of the first quarter of the current fiscal year, banks and financial institutions have accumulated about 1.15 trillion rupees in loanable funds (excess liquidity). This confirms that there is no demand for loans in banks, but deposits are increasing. With the beginning of the new fiscal year, the amount of loans available to banks and financial institutions had started to increase. The same trend has continued in the months since then. 

In the current fiscal year, with the expansionary budget and monetary policy, it was expected that credit flow would increase and the amount of loanable funds accumulated in banks would decrease. There were also signs of an increase in loan demand in the initial months. However, banks say that credit expansion has come to a standstill due to the uncomfortable situation created after the protests on 23 and 24 Bhadra. This is the reason why deposits in banks and financial institutions are continuously increasing, while the amount of loans available is also accumulating, they say.