The financial condition of Nepal’s banks and financial institutions has deteriorated, with finance companies showing even greater distress.

Among the 15 finance companies that published their financial statements for the second quarter of Fiscal Year (FY) 2024/25, seven reported losses, while eight managed to earn profits during this period.

The companies incurring losses include Gorkha Finance, Best Finance, Guheshwori Merchant, Samriddhi Finance, Reliance Finance, Janaki Finance, and Pokhara Finance. Of these, Gorkha Finance, Best Finance, Janaki Finance, and Pokhara Finance had recorded profits during the same period last fiscal year.

Pokhara Finance reported the highest loss, with its six-month figure exceeding Rs 637.9 million. On the other hand, Manjushree Finance posted the highest profit of Rs 117 million, followed by ICFC Finance with Rs 109.1 million in profit.

Out of the 15 finance companies, only two—Progressive Finance and Nepal Finance—managed to reduce their non-performing loan (NPL) ratios. The remaining companies saw a significant increase in NPLs.

Janaki Finance reported the highest NPL ratio at 40.88 percent, a sharp increase from 19.99 percent in the same period last fiscal year. According to Janaki Finance’s Information Officer, Roshan Kapar, this rise is due to the non-recovery of loans from three politically influential individuals and six large borrowers. He stated, “Once these loans are recovered, NPLs will decrease.”

Pokhara Finance followed with the second-highest NPL ratio at 33.44 percent. The company’s Information Officer, Raju Mohan Bhattarai, attributed the increase to the inability to recover large loans.

Amid its worsening financial condition, Pokhara Finance has initiated a merger and acquisition process. The company passed resolutions at its AGMs on January 13, 2023, and January 14, 2024, to merge with a suitable bank or financial institution. Subsequently, it formed a merger and acquisition committee on January 22, 2024.

Following a recent on-site inspection, Nepal Rastra Bank (NRB) had identified that Pokhara Finance is heading towards financial crisis. The central bank has already taken action against the company and issued warnings to its operators.