Despite Increased Lending in Vaishakh, Over 7,000 Loan Accounts Were Closed

June 26, Kathmandu – Although banks increased loan disbursements in the Vaishakh month of the current fiscal year, the number of loan accounts decreased by more than 7,000. In Vaishakh alone, banks extended an additional NPR 1 billion in loans, bringing the total loan increase to NPR 312 billion over the first 10 months of the fiscal year.

Bank officials attributed the decline in loan accounts to stagnant demand for new loans, with banks focusing on recovering existing loans and closing long-pending accounts. Following the general strike movement, approximately 4,000 loan accounts had already declined by the Kartik month of the previous year. The chief executive officer of one commercial bank explained that many individuals who opened accounts for loans did not take any loans, resulting in closed accounts and a reduced number of loan accounts.

“After the general strike, businessmen’s morale weakened and some loan accounts were closed,” the CEO said. “Due to an unfavorable environment for starting new industries or expanding existing ones, many loan accounts were opened but then closed without disbursing loans.”

The Nepal Rastra Bank’s data shows that loan accounts decreased not only in Vaishakh but also in Kartik across banks and financial institutions. The CEO further explained that banks decided to close old, pending, and small-value loan accounts, which led to the decline in the number of loan accounts. Some customers themselves closed accounts that were opened after completing the loan procedures but not availed.

“This does not mean that banks’ loan portfolios have increased,” he added. “The reduction is due to some loans being fully repaid and some accounts being closed because the procedures were incomplete.” Another CEO of a commercial bank noted that the decrease in loan accounts is not due to an increase in customers closing accounts after repaying loans.

“Loan accounts may decline when loans are fully repaid or written off,” he said. “However, loan demand has not increased, and as new accounts are not opened, old accounts are also being closed.” The CEO speculated that the high rate of loan account closures might be due to the lack of new loan applications combined with the closure of old accounts. He agreed that some accounts are closed after loan procedures are completed but payments are not made. Recently, bank branch mergers have also contributed to the reduction in loan accounts, according to Nepal Rastra Bank spokesperson Guru Paudel.

“Accounts with zero balances, very small loans, or zero loans, which fulfill closure procedures, have been closed,” Paudel said. “Since banks regularly write off loans and must complete necessary approvals and procedures from their boards, a large number of closures appear to have happened simultaneously.” According to the central bank, 7,177 loan accounts were closed in the month of Vaishakh alone. The high number reflects the simultaneous implementation of account closure processes.

Statistics from the central bank also reveal that more than 4,000 loan accounts were reduced in just the month of Kartik. Despite the decrease in loan accounts during Vaishakh, deposit accounts increased by over 300,000. By Vaishakh, the total number of loan and deposit accounts in banks and financial institutions reached 6,272,300.

As of Vaishakh, the number of loan accounts stood at 2,037,435, compared to 2,044,612 in Chaitra. Previously, loan accounts had decreased from 1,998,491 in Asoj to 1,994,912 in Kartik. The total loan accounts at banks and financial institutions were 1,953,000 as of Baisakh 2082 (mid-April 2025), increasing to 1,961,469 by Asar 2082 (mid-July 2025). More than 8,000 loan accounts were added during this period, the central bank reported.