Non-Performing Assets and Their Impacts on Profitability : A study on Commercial Banks in Nepal

Abstract

This research analyzes the Non-Performing Assets (NPAs) and Their Impacts on the Profitability of Nepalese Commercial Banks. Throughout the study, we can see the connection between NPA and earning factors while evaluating the causes of NPA growth and presenting solutions to reduce the financial damage to these institutions. This study responds to knowledge deficiency by examining up-to-date research findings from Nepalese commercial banks. The research also highlights how Nepalese Commercial banks are affected in their profitability through NPAs. Secondly, the research inquiry drives the growth of the NPAs in the Nepalese commercial banks.

Nepalese commercial banks should implement specific strategies to mitigate the unfavorable outcomes of NPAs on their earnings levels. The research methodology follows a quantitative approach, including trend analysis, exploratory summary, correlation, and regression investigation. The task also draws its information about NPAs from fiscal years 2018/19 to 2022/23 through data from five leading Nepalese commercial banks including Everest Bank Ltd., Nepal Bank Ltd., Nabil Bank Limited, Nepal SBI Bank Ltd., and NIC ASIA Bank Ltd.

The investigation shows that NPLs create a strong antagonistic influence on the bank’s financial performance. Numerous financial conditions coupled with borrower default events and weak credit appraisal systems drive the increase of NPLs in banking sectors. To promote financial well-being as well as sustainable profitability in Nepalese commercial banks, the report stresses that strong NPA management practices with efficient loan recovery methods, diligent monitoring, and effective credit risk management are essential.