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.

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.

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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

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

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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

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

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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.