Current Status of Banking in Nepal

July 17, 2020 | Investopaper

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 72 at the end of Jestha, 2077 (Mid-June 2020). The ‘B’ class development banks and ‘C’ class finance companies are in the danger of extinction.

Altogether 27 commercial banks, 23 development banks and 22 finance companies are currently operating (as of Mid-June 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.

Despite the reduction in number, altogether 3.19 crores of deposit account holders and 15.25 lakh loan accounts are being served by the BFIs through their 5,694 branches. This indicates that almost every Nepali has a bank account (deposit account).

Number of BFIs And Their Branches

Until the Mid June, 2020, Commercial Banks have the highest number of branches of 4,239 while development banks and finance have 1,216 and 239 branches respectively. Similarly, there are currently 90 microfinance institutions in Nepal. Microfinance have 4,022 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	4,239
Development Banks (B)	23	1,216
Finance (C)	22	239
Microfinance (D)	90	4,022
Infrastructure Development Bank	1
Total	163	9,716

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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 2,511 branches of BFIs are operating in Bagmati State. However, Karnali Province has the lowest banking exposure with only 385 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 June 2020).

Province	A	B	C	D	Total
1	677	172	43	681	1,573
2	493	86	31	777	1,387
Bagmati	1,481	338	92	600	2,511
Gandaki	513	220	29	520	1,282
5	616	308	34	913	1,871
Karnali	175	20	4	186	385
Sudurpaschim	284	72	6	345	707

Total	4,239	1,216	239	4,022	9,716

Presence Of Commercial Banks at Local Level

Of the total 753 local levels, commercial banks extended their branches at 746 levels (as of mid-June 2020). 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	746

Deposit And Loan Accounts On BFIs

Altogether, 3.19 deposit account exist in the A,B or C class banks. Out of this, commercial banks have the largest deposit accounts of 2.66 crores. Likewise, 15.25 lakh borrowers have taken loan facility from these BFIs.

The table below presents the number of Deposit and Loan Accounts:

BFIs	No. of Deposit Accounts	No. of Loan Accounts
A	26,568,299	1,150,750
B	4,668,363	329,196
C	649,117	45,489

Total	31,885,779	1,525,435

Branch less Banking Centers And Customers

Only commercial banks have opened 1,586 branch less banking centers. There are currently 190,250 branch less banking customers in Nepal.

BFIs	Number of Branch less Banking Centers	Number of Branch less Banking customers
A	1,586	190,250
B	–	–
C	–	–

Total	1,586	190,250

Mobile Banking, Internet Banking And ATM Users

A,B and C Class BFIs have opened in total of 3,945 ATMs out of which commercial banks occupy 3,566 ATMs. The number of mobile banking users have surged rapidly in recent times. Altogether 1.06 crores customers are currently taking banking services through the use of mobile banking. Likewise, 9.92 lakh users are involved in the internet banking service.

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

	A	B	C	Total
No.of Mobile Banking Customers	9,465,648	1,118,251	86,173	10,670,072
No. of Internet Banking Customers	959,636	27,334	5,754	992,724
No. of ATMs	3,566	328	51	3,945

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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 Jestha end 2077 [Mid June 2020], a total of 72.43 lakh customers are the users of the debit cards while 1.57 lakh bank customers use the credit card. Similarly, 65,530 customers are involved in the usage of prepaid cards.