Current Status of Banking in Nepal

August 28, 2020 | Investopaper

As of Ashad end 2077 (Mid-July, 2020), 3.25 crores deposit accounts have been opened in banks and financial institutions. This is 24 lakhs more than the total population of Nepal. According to the Central Statistics Office, the total population of Nepal as of Thursday is 3 crores and 65 thousand.

Just because there are more bank accounts than the population does not mean that all Nepalis have access to bank accounts. An individual can also open an account in more than one bank and financial institution. That is why there are more bank accounts than the population.

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In the last fiscal year (2076/77) alone, 45.87 lakhs additional deposit accounts have been opened in banks and financial institutions. A total of 2.79 crores bank accounts were opened in banks and financial institutions until Ashad end, 2076. This has increased to 3.25 crores at the end of Ashad, 2077. This is the number of accounts opened only in commercial banks, development banks and finance companies. This number will be higher if the accounts opened in the MFI are also included.

Banks & Financial Institutions (BFIs) In Nepal

With the introduction of the merger by-laws, the number of banks and financial institutions (BFIs) have gradually declined in Nepal. Until now, 187 institutions merged with each other to form 45 BFIs.  The total number of BFIs (A,B & C) stood at 69 at the end of Ashad, 2077 (Mid-July 2020). The ‘B’ class development banks and ‘C’ class finance companies are in the danger of extinction.

Related: Merger/Acquisition By Commercial Banks In Nepal

Altogether 27 commercial banks, 20 development banks and 22 finance companies are currently operating (as of Mid-July 2020) in Nepal. Several development banks and finance companies have entered into the merger/acquisition agreement with the commercial banks. Therefore, the number of BFIs is expected to decline. The central bank’s initiative to induce big merger (merger of commercial banks) is likely to bring the number of financial institutions further down.

Number of BFIs And Their Branches

Until the Mid July, 2020, Commercial Banks have the highest number of branches of 4,436 while development banks and finance have 1,029 and 243 branches respectively. Similarly, there are currently 85 microfinance institutions in Nepal. Microfinance have 4,057 total branches.

Also Read: Net Profit of Commercial Banks in Nepal [With Ranking]

The table below shows the number of BFIs including the ‘D’ class microfinance and their branches.

Banks/BFI Class No. Of BFIs No. Of Branches
Commercial Banks (A) 27 4,436
Development Banks (B) 20 1,029
Finance (C) 22 243
Microfinance (D) 85 4,057
Infrastructure Development Bank 1
Total 155 9,765

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Branches Of BFIs Based On The Province

Bagmati State has the highest penetration in terms of number of branches of BFIs. Altogether 2,528 branches of BFIs are operating in Bagmati State. However, Karnali Province has the lowest banking exposure with only 384 banking branches available. Out of which, 186 branches are of microfinance companies.

The table below shows the branches of BFIs on the different provinces (As of Mid July 2020).

Province  A B C D Total
1 687 165 45 682 1,579
2 514 69 31 790 1,404
Bagmati 1,553 275 92 608 2,528
Gandaki 555 179 29 525 1,288
5 657 262 36 917 1,872
Karnali 177 17 4 186 384
Sudurpaschim 293 62 6 349 710
Total 4,436 1,029 243 4,057 9,765

Related: Importance of Banking in Developing Countries like Nepal

Presence Of Commercial Banks at Local Level

Commercial banks have reached 747 out of 753 local levels formed after the country’s transition to federalism. After the launch of a program called ‘Bank Account for All Nepalis’, the number of bank accounts has increased due to increased financial literacy. In State 2 and State 5, banks have reaches all local levels.

The table below shows the presence of commercial banks at local level [ As of Mid-June 2020].

Province  Number of Local Levels Local Levels Having Bank Branches
1 137 136
2 136 136
Bagmati 119 117
Gandaki 85 84
5 109 109
Karnali 79 78
Sudurpaschim 88 86
Total 753 747

Also Read: Contribution of Banking sector to the GDP of Nepal

Deposit And Loan Accounts On BFIs

Altogether, 3.24 crores deposit account exist in the A,B or C class banks. Out of this, commercial banks have the largest deposit accounts of 2.77 crores. Likewise, 15.44 lakh borrowers have taken loan facility from these BFIs.

The table below presents the number of Deposit and Loan Accounts [As of Mid-July, 2020]:

BFIs No. of Deposit Accounts No. of Loan Accounts
A 27,724,764 1,196,289
B 4,075,310 302,441
C 654,130 45,329
Total 32,454,204 1,544,059

Related: E-Banking In Nepal: Every Thing You Need To Know

Branch less Banking Centers And Customers

Only commercial banks have opened 1,574 branch less banking centers. There are currently 193,607 branch less banking customers in Nepal.

BFIs Number of Branch less Banking Centers Number of Branch less Banking customers
A 1,574 193,607
B
C
Total 1,574 193,607

Also Read: Current Status Of Insurance In Nepal

Mobile Banking, Internet Banking And ATM Users

A,B and C Class BFIs have opened in total of 4,106 ATMs out of which commercial banks occupy 3,759 ATMs. The number of mobile banking users have surged rapidly in recent times. Altogether 1.13 crores customers are currently taking banking services through the use of mobile banking. Likewise, 10.31 lakh users are involved in the internet banking service.

See the current data (Mid-July 2020) related to mobile banking, internet banking, and ATMs in the table below:

A B C Total
No.of Mobile Banking Customers 10,115,313 1,100,743 90,741 11,306,797
No. of Internet Banking Customers 1,001,866 23,332 6,029 1,031,227
No. of ATMs 3,759 296 51 4,106

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Debit, Credit And Prepaid Cards

With the banks creating awareness and providing various discounts on the use of cards for day to day transactions, there is decent growth in the number of card holders. As of Ashad end 2077 [Mid July 2020], a total of 73.29 lakh customers are the users of the debit cards while 1.60 lakh bank customers use the credit card. Similarly, 63,775 customers are involved in the usage of prepaid cards.

A C Total 
No. of Debit Cards 7,062,472 231,287 35,443 7,329,202
No. of Credit Cards 160,297 160,297
No. of Prepaid Cards 63,775 63,775

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