Current Status of Banking in Nepal [Updated]

February 15, 2021 | Investopaper

As of Poush end, 2077 BS (Mid-Jan, 2020), 3.46 crores deposit accounts have been opened in banks and financial institutions. 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. The number of bank accounts is more than the total population of Nepal. According to the Central Statistics Office, the total population of Nepal just over 3 crores.

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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Banks & Financial Institutions (BFIs) In Nepal

With the introduction of the merger by-laws, the number of banks and financial institutions (BFIs) has gradually declined in Nepal. Until now, the number of Banks and Financial Institutions have declined to 144. The total number of BFIs (A, B & C) stood at 67 at the end of Poush, 2077 BS (Mid-Jan 2021). The ‘B’ class development banks and ‘C’ class finance companies are in danger of extinction. Likewise, the ‘D’ class microfinance companies are also undergoing merger/acquisition aggressively.

Altogether 27 commercial banks, 19 development banks, 21 finance companies, and 76 microfinance are currently operating (as of Mid-Jan 2021) in Nepal. Several development banks and finance companies have entered into the merger/acquisition agreement with commercial banks. Therefore, the number of BFIs is expected to decline. The central bank’s initiative to induce a big merger (merger of commercial banks) is likely to bring the number of financial institutions further down.

Number of BFIs And Their Branches

Until Mid-Jan, 2021, Commercial Banks have the highest number of branches of 4,613 while development banks and finance have 1,048 and 254 branches respectively. Similarly, there are currently 76 microfinance institutions in Nepal. Microfinance has 4,272 total branches.

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	4,613
Development Banks (B)	19	1,048
Finance (C)	21	254
Microfinance (D)	76	4,272
Infrastructure Development Bank	1
Total	144	10,187

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Branches Of BFIs Based On The Province

Bagmati State has the highest penetration in terms of the number of branches of BFIs. Altogether 2,640 branches of BFIs are operating in Bagmati State. However, Karnali Province has the lowest banking exposure with only 399 banking branches available. Out of which, 188 branches are of microfinance companies.

The table below shows the branches of BFIs in the different provinces (As of Mid Jan 2021).

Province	A	B	C	D	Total
1	699	170	46	698	1,613
2	532	77	34	870	1,513
Bagmati	1,627	287	96	630	2,640
Gandaki	573	183	30	535	1,321
Lumbini	678	270	38	993	1,979
Karnali	188	17	4	190	399
Sudurpaschim	316	44	6	356	722

Total	4,613	1,048	254	4,272	10,187

Presence Of Commercial Banks at Local Level

Commercial banks have reached 745 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 5, banks have reached all local levels.

The table below shows the presence of commercial banks at the local level [ As of Mid-Jan 2021].

Province	Number of Local Levels	Local Levels Having Bank Branches
1	137	136
2	136	135
Bagmati	119	117
Gandaki	85	84
Lumbini	109	109
Karnali	79	78
Sudurpaschim	88	86

Total	753	745

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Deposit And Loan Accounts On BFIs

Altogether, 3.46 crores deposit account exists in the A, B, or C class banks. Out of this, commercial banks have the largest deposit accounts of 2.97 crores. Likewise, 16.01 lakh borrowers have taken loan facilities from these BFIs.

The table below presents the number of Deposit and Loan Accounts [As of Mid-Jan, 2021]:

BFIs	No. of Deposit Accounts	No. of Loan Accounts
A	29,767,651	1,245,271
B	4,208,542	311,147
C	695,756	45,539

Total	34,671,949	1,601,958

Branchless Banking Centers And Customers

Only commercial banks have opened 1,685 branchless banking centers. There are currently 201,676 branchless banking customers in Nepal.

BFIs	Number of Branchless Banking Centers	Number of Branchless Banking customers
A	1,685	201,676
B	–	–
C	–	–

Total	1,685	201,676

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Mobile Banking, Internet Banking, And ATM Users

A, B, and C Class BFIs have opened in a total of 4,254 ATMs out of which commercial banks occupy 3,891 ATMs. The number of mobile banking users has surged rapidly in recent times. Altogether 1.26 crores customers are currently taking banking services through the use of mobile banking. Likewise, 10.90 lakh users are involved in the internet banking service.

See the current data (Mid-Jan 2021) related to mobile banking, internet banking, and ATMs in the table below:

	A	B	C	Total
No.of Mobile Banking Customers	11,354,095	1,219,563	115,787	12,689,445
No. of Internet Banking Customers	1,056,340	27,121	6,861	1,090,322
No. of ATMs	3,891	310	53	4,254

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Debit Cards, Credit Cards, 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 cardholders. As of Poush end 2077 BS [Mid Jan 2021], a total of 80.49 lakh customers are users of debit cards while 1.76 lakh bank customers use credit cards. Similarly, 55,617 customers are involved in the usage of prepaid cards.