Non-Performing Assets and its Effect on Profitability of Nepalese Commercial Banks (with reference to ADBL, NIBL, GIBL, EBL and NIC Asia Bank)

Abstract

This study aimed to examine the non-performing assets and its effect on profitability of Nepalese commercial banks. The research analyzed of profitability ratio, return on assets, return on equity, profit margin ratio, non-performing loan to total loan ratio, total loan to total assets ratio provision for loan loss coverage ratio of Nepalese commercial banks. Secondary data were collected from Nepal Rastra Bank Annual Report, different news, articles published. The study covers the period of 2070 to 2077 for four private commercial bank and one government bank. Data where analyzed using descriptive research design. The asthmatic mean, standard deviation, correlation coefficient regression model used to examine the relationship of dependent and independent variables and SPSS tools used for data analysis. The regression model were estimate the significant impact of non-performing loan on Nepalese commercial banks. NLTTLR, the ratio which measures the proportion of non-performing loan out of the total loan. The ratio of ADBL is highest than four banks, which has average ratio of 6.00 but it is in the declining trend. Ratio of NIBL, GIBL and NIC are 1.98, 2.82, 5.32 and 1.5 respectively. And combined average is 3 mean. TLTTAR of all five banks or combined mean 70.109 and among all fivebanks it is higher in EBL which is 72.94 TLTAR of ADBL, NIBL, GIBL, NIC are 71.75, 66.32, 70.15 and 61.36 respectively and standard deviation is also high in EBL than of four banks.GIBL is able to maintain loan portfolio. Provision for loan loss amount (PLL) is also in the same ratio of NPL. But ADBL has maintained lower proportion of PLL in year 2074 than NPL and increasing it from 2074 to maintain previous NPL.