NON-PERFORMING ASSETS AND PROFITABILITY OF NEPALESE COMMERCIAL BANKS

Abstract

One of the components of the country's financial system is the banking industry. A country's banking system is a key component of its financial system, and the health of its banking sector is a good indicator of how well its economy is surviving. A robust banking industry is necessary for a thriving economy. Any nation's banking industry collapse might have a negative effect on other industries. One of the main issues facing Nepal's banking industry is non-performing assets, or NPAs. The phrase "nonperforming assets," or "NPAs," is used in the banking and financial industries. NPAs are mostly employed in the bank's lending department. Non-performing assets are bank assets that don't contribute to the organization's ability to turn a profit. Any nation's bank performance is reflected in its NPAs. Higher NPAs result in worse bank performance. The topic of non-performing assets (NPAs) has been extensively deliberated within global financial systems. Each nation's economy as a whole is impacted by the NPA issue, not just the banks. An attempt has been made to examine the effect of non-performing assets (NPAs) on the profitability of commercial banks in Nepal. The research covers the last eight fiscal years, from 2014/15 to 2021–2022, and five commercial banks in Nepal. The research uses secondary data and is exploratory and diagnostic in nature. The present study concludes that a rise in non-performing assets (NPA) is associated with a decline in net profit, ROA, and ROE due to their negative correlation. Nonetheless, it is seen that NPA and Net profit are positively connected, which is an uncommon occurrence, as a result of the bank's increased lending and business volume. An increase in the bank's business volume causes the NPA of the banks to rise within the specified time.