NIC Asia Bank’s accumulated losses have increased following a directive from Nepal Rastra Bank (NRB) to raise provisions for loans and other potential risks.
In its unannualized financial statement for the last fiscal year, 2023/24, the bank had initially allocated Rs 2.84 billion for provisioning. However, after NRB instructed the bank to set aside an additional Rs 1.04 billion, the total provision rose to Rs 3.88 billion—a 36.61% increase.
According to NRB sources, the additional provision was mandated based on the current status of the bank’s loans and non-banking assets.
The bank’s audit report indicates an accumulated loss of Rs 2.66 billion for FY 2023/24. Earlier, it had reported an accumulated loss of Rs 2.3 billion in its unannualized financial statement.
In contrast, NIC Asia had posted a profit of Rs 3.53 billion in the previous fiscal year, 2022/23.
By the second quarter of the current fiscal year (2024/25), the bank’s accumulated losses stand at approximately Rs 2.52 billion.
External auditing also revealed a sharp decline in net profit.
While the unannualized financial statement for FY 2023/24 had reported a net profit of Rs 1.38 billion, the figure was revised downward by 49.27% to Rs 701.4 million after auditing.
The bank’s financial health has deteriorated primarily due to a surge in non-performing loans (NPLs). The NPL ratio jumped from 0.88% in FY 2022/23 to 3.45% in FY 2023/24 and further climbed to 4.61% by the second quarter of the current fiscal year.
NIC Asia Bank has faced multiple regulatory actions due to its failure to comply with NRB directives on loan classification, loan loss provisioning, and capital reserves among other requirements.
An NRB investigation revealed that the bank had paid higher interest rates than published to its directors, their family members, and affiliated institutions. Additionally, the bank was found to have backdated fixed deposit account openings for these parties in the second quarter of FY 2024/25.
As a result, NRB has instructed the bank to refund the excess interest and directed CEO Roshan Neupane, Chairman Tulsi Ram Agrawal, and directors Trilok Chandra Agrawal and Ramchandra Sanghai to refrain from such practices, citing Section 100(2)(a) of the Nepal Rastra Bank Act.
The financial turmoil has also impacted the bank’s investors. NIC Asia’s upcoming Annual General Meeting (AGM) on March 6 will discuss a proposal to forgo dividend distribution for FY 2023/24. This follows NRB’s previous restrictions on dividend payouts for FY 2020/21 and 2021/22 due to the bank’s failure to maintain required core capital levels.
To strengthen its primary capital reserve, the bank plans to issue Rs 5 billion worth of non-redeemable preference shares. By the first quarter of FY 2024/25, its primary capital reserve ratio stood at 8.81%, slightly above the regulatory minimum of 8.5%.
NRB has instructed the bank to submit a corrective action plan and ensure compliance with regulatory requirements.
