KATHMANDU: The total value of non-banking assets held by Nepal’s commercial banks has exceeded Rs 46 billion, underscoring growing stress in the country’s banking sector as lenders continue to grapple with weak loan recoveries and rising defaults.

According to the latest Nepal Rastra Bank (NRB) report, the combined non-banking assets of the country’s 19 commercial banks reached Rs 46.08 billion by the end of Jestha in the fiscal year 2025/26 (2082/83 BS), an increase of 18.81 percent, or Rs 7.30 billion, from Rs 38.79 billion recorded during the same period a year earlier.

The increase is largely attributed to aggressive lending in previous years and inflated collateral valuations. As more borrowers failed to repay their loans, banks were compelled to acquire pledged properties, including land and buildings, causing a steady rise in unproductive assets. The growing stock of these assets is putting pressure on banks’ profitability, liquidity, and capacity to issue new loans.

Among all commercial banks, Himalayan Bank reported the highest volume of non-banking assets, which rose 17.29 percent year-on-year to Rs 6.24 billion. Global IME Bank ranked second with Rs 5.89 billion in non-banking assets despite recording a slight 0.77 percent decline compared to the previous year. During the review period, Nepal Investment Mega Bank saw its non-banking assets surge 47.19 percent to Rs 4.70 billion, while Prime Commercial Bank recorded the sharpest increase, with its non-banking assets more than doubling by 107.29 percent to Rs 4.68 billion.

The central bank’s data also showed that NIC Asia Bank held Rs 4.18 billion in non-banking assets, followed by Nabil Bank with Rs 3.39 billion, Kumari Bank with Rs 2.45 billion, Laxmi Sunrise Bank with Rs 2.44 billion, NMB Bank with Rs 2.02 billion, Prabhu Bank with Rs 1.97 billion, Citizens Bank International with Rs 1.58 billion, Agricultural Development Bank with Rs 1.39 billion, Nepal SBI Bank with Rs 1.36 billion, and Sanima Bank with Rs 1.22 billion in acquired assets.

Among banks holding less than Rs 1 billion in non-banking assets, Siddhartha Bank reported Rs 866.97 million, Machhapuchchhre Bank Rs 650.56 million, Everest Bank Rs 515.86 million, and Rastriya Banijya Bank Rs 310.44 million. Nepal Bank Limited maintained the lowest level of non-banking assets among all commercial banks at Rs 233.65 million, although its total increased 14.47 percent from the previous year.

Despite the overall rise across the banking industry, several banks managed to reduce their non-banking assets during the review period. NIC Asia Bank reduced its holdings by 10.53 percent, Nabil Bank by 10.91 percent, Kumari Bank by 3.12 percent, Machhapuchchhre Bank by 32.79 percent, Everest Bank by 17.42 percent, and Rastriya Banijya Bank by 2.97 percent, reflecting efforts to strengthen their balance sheets.

The continued growth in non-banking assets comes at a time when Nepal’s banking system is experiencing excess liquidity and historically low interest rates. However, despite cheaper borrowing costs, demand for new loans has remained weak. With an increasing share of bank capital tied up in acquired properties rather than productive lending, the banking sector faces mounting challenges in sustaining profitability, improving liquidity, and supporting broader economic growth through fresh credit expansion.