Financial soundness Indicators of BFIs in Nepal
1. Capital Adequacy : Capital Adequacy Ratio (CAR) for commercial banks is 11 %, CAR for development banks is and finance companies is 10 %. 2. Assets Quality : Non Performing loan (NPL) in 2021/22 was about 1.31%. Composition of NPL shows some signs of deterioration in asset quality with an increase in restructured/rescheduled loans within the banking sector. Large share of NPL which is about 51.40% in the banking sector falls into the loss category. 3. Leverage Ratio: Basel Committee on Banking Supervision introduced leverage ratio that is complementary to the risk-based capital framework and aims to restrict the build-up of excessive leverage in the banking sector. It assesses the adequacy of Tier 1 capital to On balance sheet and off balance sheet exposures. NRB has specified 4% of leverage ratio. It is well above the mandatory requirement in the period 2021/22. 4...
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