Nepal Bank Limited

Dharmapath, Kathmandu

Interim Financial Statement (Unaudited)

As on Chaitra End 2080

NBL Interim Financial Report FY 2080/81-Q3 Page 1

 Condensed Statement of Financial Position (Quarterly)
As on Quarter ended Chaitra, 2080 (Mid-April 2024)
Figures in NPR
Immediate Previous
Assets This Quarter Ending
Year Ending
Cash and cash equivalent 14,011,374,859 8,656,502,983
Due from Nepal Rastra Bank 17,878,572,552 19,748,872,262
Placement with Bank and Financial Institutions 4,239,235,000 582,511,250
Derivative Financial Instrument 3,544,143,705 8,594,260
Other Trading Assets 98,665,479 115,040,866
Loan and advances to B/FIs 6,236,848,513 5,499,659,799
Loan and Advances to Customers 185,998,574,516 178,556,569,017
Investment Securities 56,460,742,910 56,946,182,687
Current Tax Assets 2,601,941,745 1,202,965,540
Investment in Subsidiaries - -
Investment in Associates 2,170,833,538 2,736,953,345
Investment Property 182,511,952 198,109,605
Property and Equipment 13,346,575,199 13,363,622,774
Goodwill and Intangible Assets 23,754,483 31,844,285
Deferred Tax Assets - -
Other Assets 8,694,178,435 9,088,169,165
Total Assets 315,487,952,887 296,735,597,837
Liabilities
Due to Bank and Financial Institutions 775,201,286 1,275,441,704
Due to Nepal Rastra Bank - 70,000,000
Derivative Financial Instruments 3,534,616,425 8,541,000
Deposits from Customers 261,479,359,346 244,513,999,703
Borrowings - 262,300,000
Current Tax Liabilities - -
Provisions 94,350,874 247,896,915
Deferred Tax Liabilities 4,171,353,549 4,082,584,932
Other Liabilities 5,729,583,489 6,257,810,167
Debt securities issued 3,494,792,353 3,494,351,608
Subordinated Liabilities - -
Total Liabilities 279,279,257,322 260,212,926,029
Equity
Share Capital 14,694,022,928 14,694,022,928
Share Premium - -
Retained Earnings (1,046,632,496) 389,959
Reserves 22,561,305,133 21,828,258,921
Total equity attributable to equity holders 36,208,695,564 36,522,671,808
Non-controlling interest - -
Total Equity 36,208,695,564 36,522,671,808
Total Liabilities and Equity 315,487,952,887 296,735,597,837

NBL Interim Financial Report FY 2080/81-Q3 Page 2

 Condensed Statement of Profit or Loss
For the Quarter Ended Chaitra 2080 (Mid-April 2024)
Figures in NPR
Current Year Previous Year Corresponding
Particulars Up to This Quarter Up to This
This Quarter This Quarter
(YTD) Quarter (YTD)
Interest Income 6,048,203,715 19,297,783,691 6,660,287,896 17,888,025,402
Interest expense 3,907,111,910 12,522,625,602 4,018,037,311 11,396,900,356
Net interest income 2,141,091,805 6,775,158,090 2,642,250,585 6,491,125,046
Fees and Commission Income 331,016,482 928,939,044 254,899,698 689,332,505
Fees and Commission Expense 28,520,898 72,638,170 27,963,334 60,539,619
Net fee and commission income 302,495,584 856,300,874 226,936,364 628,792,886
Net interest, fee and commission income 2443,587,390 7,631,458,963 2,869,186,950 7,119,917,933
Net trading income 25,014,584 69,831,972 20,900,148 48,347,357
Other operating income 108,150,970 292,484,511 84,524,685 218,353,352
Total operating income 2,576,752,943 7,993,775,447 2,974,611,783 7,386,618,641
Impairment charge/(reversal) for loans 1,582,816,415
3,660,084,055 972,896,278 1,485,074,757
and other losses
Net operating income 993,936,528 4,333,691,392 2,001,715,505 5,901,543,884
Operating Expenses
Personnel Expense 828,993,274 2,711,854,497 1,025,530,376 2,829,882,665
Other Operating Expense 249,343,226 761,186,012 196,148,118 606,197,388
Depreciation and Amortization 92,864,089 275,321,343 73,004,782 243,846,307
Operating profit (177,264,061) 585,329,540 707,032,230 2,221,617,524
Non-operating Income 2,094,855 3,149,924 5,600,737 16,202,737
Non-operating expense - - - -
Profit before Income tax (175,169,206) 588,479,464 712,632,967 2,237,820,261
Income tax Expenses
Current Tax (40,043,436) 193,440,502 158,783,544 614,153,102
Deferred Tax 324,416,923 264,529,857 (57,825,151) (158,662,840)
Profit/(loss) for the period 459,542,694 130,509,106 611,674,574 1,782,329,999

NBL Interim Financial Report FY 2080/81-Q3 Page 3

 Statement of Comprehensive Income
For the Quarter ended Chaitra, 2080 (Mid April 2024)
Figures in NPR
Current Year Previous Year Corresponding
Particulars Up to This
Up to This
This Quarter Quarter This Quarter
Quarter (YTD)
(YTD)
Profit or Loss for the Period (459,542,694) 130,509,106 611,674,574 1,782,329,999
Other Comprehensive Income
Items that will not be reclassified
a
to Profit or Loss
Gains / (Losses) from investment
in equity instruments measured at (391,098,708) (20,895,199) 184,105,962 328,241,608
fair value
Gains / (Losses) on revaluation

Actuarial Gains / (Losses) on

(188,325,200) (564,975,600) (227,548,131) (682,644,393)
defined benefit plans

Income tax relating to above items 173,827,172 175,761,240 13,032,651 106,320,836

Net other Comprehensive

Income that will not be (405,596,735) (410,109,559) (30,409,518) (248,081,950)
reclassified to Profit or Loss
Items that are or may be
b
reclassified to Profit or Loss
Gains (Losses) on cash flow hedge
Exchange gains (Losses) (arising
from translating financial assets of
foreign operation)
Income tax relating to above items
Net other Comprehensive Income
that are or may be reclassified to - - - -
Profit or Loss
Share of other comprehensive
c income of associate accounted as - - - -
per equited method
Other Comprehensive income
(405,596,735) (30,409,518) (248,081,950)
for the period, net of income tax (410,109,559)
Total Comprehensive income for (865,139,429) (279,600,454) 581,265,056 1,534,248,049
the period
Profit attributable to:

Equity shareholder of the bank (865,139,429) 581,265,056 1,534,248,049

(279,600,454)
Non-controlling interest - - - -
Total
(865,139,429) (279,600,454) 581,265,056 1,534,248,049

NBL Interim Financial Report FY 2080/81-Q3 Page 4

Ratios as per NRB Directive
Previous Year
Current Year
Corresponding
Particulars Up to This Up to This
This This
Quarter Quarter
Quarter Quarter
(YTD) (YTD)

Earnings Per Share

Basic Earnings Per Share 1.18 16.17
Diluted Earnings per share 1.18 16.17
Ratio as per NRB Directives
Ratios as per NRB Directives
Capital fund to RWA 13.09 % 13.89 %
Non-Performing Loan (NPL) to total loan 4.85 % 4.16 %
Total Loan Loss Provision to Total NPL 103.86 % 88.10 %
Cost of Funds 5.81 % 7.19 %
Credit to Deposit Ratio 74.89 % 77.74 %
Base Rate 7.99 % 9.92 %
Interest Rate Spread 3.95% 4.10 %

NBL Interim Financial Report FY 2080/81-Q3 Page 5

 Condensed Consolidated Statement of Changes in Equity
Figures in NPR
For the Quarter Ended Chaitra 2080 (Mid April 2024)
Attributable to equity holders of the Bank

Regulator

controllin
Revaluati
Exchange
equalisati

y Reserve
premium

Retained
General

g interest
Capital

Reserve

Reserve

earning
reserve

reserve

reserve
Share

Share

Other

Total

Total
Value

equity
Non-
Fair
on

on
Particulars

Balance at 1st Shrawan 2079 14,405,904,831 - 6,067,232,483 86,786,914 3,881,974,064 2,097,063,718 7,743,591,321 3,422,196,158 (2,241,136,141) 35,463,613,348 35,463,613,348

Comprehensive income for the year

Profit for the year 3,437,578,995 3,437,578,995 3,437,578,995
Other comprehensive income, net of tax
Gains/(losses) from investment in equity instruments
1,057,937,394 1,057,937,394
measured at fair value. 1,057,937,394
Gains/(losses) on revaluation - -
Actuarial gains/(losses) on defined benefit plans (1,018,619,286) (1,018,619,286) (1,018,619,286)
Gains/(losses) on cash flow hedges - -
Exchange gains/(losses) (arising from translating
- -
financial assets of foreign operation)
Total Comprehensive income for the year - - - - - 1,057,937,394 - 3,437,578,995 (1,018,619,286) 3,476,897,102 3,476,897,102
Transfer to reserve during the year 1,885,389,883 553,971 1,814,516,596 - 452,968,005 4,153,428,455 4,153,428,455
Transfer from reserve during the year - (4,153,428,455) (4,153,428,455) (4,153,428,455)
Deferred tax impact of respective reserve - -
Transactions with owners, directly recognised in equity -
share issued -
Share based payment -
Dividends to equity holders - -
Bonus shares issued 288,118,097 - (288,118,097) - -
Cash dividend paid (1,440,590,483) (1,440,590,483) (1,440,590,483)
Other - - (977,248,159) (977,248,159) (977,248,159)
Total contributions by and distributions 288,118,097 - 1,885,389,883 553,971 1,814,516,596 - - (6,859,385,193) 452,968,005 (2,417,838,642) (2,417,838,642)
Balance at Ashad End 2080 14,694,022,928 - 7,952,622,366 87,340,885 5,696,490,660 3,155,001,112 7,743,591,321 389,959 (2,806,787,423) 36,522,671,808 36,522,671,808

NBL Interim Financial Report FY 2080/81-Q3 Page 6

Balance at 1st Shrawan 2080 14,694,022,928 - 7,952,622,366 87,340,885 5,696,490,660 3,155,001,112 7,743,591,321 389,959 (2,806,787,423) 36,522,671,808 36,522,671,808
Comprehensive income for the year - - -
Profit for the year 130,509,106 130,509,106 130,509,106
Other comprehensive income, net of tax - -
Gains/(losses) from investment in equity instruments
(14,626,639) (14,626,639)
measured at fair value. (14,626,639)
Gains/(losses) on revaluation - -
Actuarial gains/(losses) on defined benefit plans (395,482,920) (395,482,920) (395,482,920)
Gains/(losses) on cash flow hedges - -
Exchange gains/(losses) (arising from translating
- -
financial assets of foreign operation)
Total Comprehensive income for the year - - - - - (14,626,639) - 130,509,106 (395,482,920) (279,600,454) (279,600,454)
Transfer to reserve during the year 26,101,821 842,488,117 - - 308,941,623 1,177,531,561 1,177,531,561
Transfer from reserve during the year - (1,177,531,561) (1,177,531,561) (1,177,531,561)
Deferred tax impact of respective reserve - -
Transactions with owners, directly recognised in equity - -
share issued - -
Share based payment - -
Dividends to equity holders - -
Bonus shares issued - - - -
Cash dividend paid - -
Other - - - (34,375,790) (34,375,790) (34,375,790)
Total contributions by and distributions - - 26,101,821 - 842,488,117 - - (1,177,531,561) 274,565,833 (34,375,790) (34,375,790)
Balance at Chaitra End 2080 14,694,022,928 - 7,978,724,186 87,340,885 6,538,978,776 3,140,374,473 7,743,591,321 (1,046,632,496) (2,927,704,509) 36,208,695,565 36,208,695,565

NBL Interim Financial Report FY 2080/81-Q3 Page 7

 Statement of Cash Flows
For the Quarter ended Chaitra, 2080 (Mid-April 2024)
Figures in NPR
Corresponding Previous
Particulars Up to This Quarter
Year Up to This Quarter
CASH FLOWS FROM OPERATING
ACTIVITIES
Interest received 19,297,783,691 16,662,707,823
Fees and other income received 331,016,482 689,332,505
Dividend received - -
Receipts from other operating activities 72,981,896 283,508,290
Interest paid (12,522,625,602) (11,339,762,724)
Commission and fees paid (72,638,170) (60,539,619)
Cash payment to employees (2,711,854,497) (2,130,415,263)
Other expense paid (761,186,012) (699,098,075)
Operating cash flows before changes in operating
assets and liabilities 3,633,477,789 3,405,732,937

(Increase)/Decrease in operating assets

Due from Nepal Rastra Bank 1,870,299,711 (2,480,355,524)
Placement with Bank and Financial Institutions (3,656,723,750) (115,619,229)
Other trading assets (22,816,957,749) 7,249,181
Loans and advances to bank and financial institutions (737,188,714) 441,948,429
Loans and advances to customers (7,442,005,500) (3,476,428,217)
Other assets 2,852,825,273 1,180,750,780
Increase/(Decrease) in operating liabilities
Due to bank and financial institutions (500,240,418) (368,338,599)
Due to Nepal Rastra Bank (70,000,000) (5,818,868,046)
Deposit from customers 16,965,359,643 33,258,816,622
Borrowings (262,300,000) (7,042,775,000)
Other liabilities 11,913,491,052 (1,350,294,768)
Net cash flow from operating activities before tax
paid 1,750,037,336 17,641,818,567
Income taxes paid (700,000,000) (900,000,000)
Net cash flow from operating activities 1,050,037,336 16,741,818,567
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of investment securities
Receipts from sale of investment securities 4,011,515,203 (7,499,509,696)
Purchase of property and equipment - (172,103,954)
Receipt from the sale of property and equipment 17,047,575 322,770
Purchase of intangible assets - (5,371,533)
Receipt from the sale of intangible assets 8,089,802 -
Purchase of investment properties - (73,793,174)
Receipt from the sale of investment properties 581,717,460 1,063,377
Interest received - -
Dividend received - 1,199,439

NBL Interim Financial Report FY 2080/81-Q3 Page 8

Net cash used in investing activities 4,618,370,039 (7,748,192,772)

CASH FLOWS FROM FINANCING

ACTIVITIES
Receipt from issue of debt securities - -
Repayment of debt securities - -
Receipts from issue of subordinated liabilities - -
Repayment of subordinated liability - -
Receipts from issue of shares - -
Dividends paid - (1,440,590,483)
Interest paid - -
Other receipt/payment (313,535,499) (2,683,345)
Net cash from financing activities (313,535,499) (1,443,273,828)
Net increase (decrease) in cash and cash
equivalents 5,354,871,876 7,550,351,966
Cash and cash equivalents at the beginning of the
period 8,656,502,983 6,391,601,653
Effect of exchange rate fluctuations on cash and cash
equivalents held - -

Cash and cash equivalents at the end of the period 14,011,374,859 13,941,953,618

NBL Interim Financial Report FY 2080/81-Q3 Page 9

 Statement of Distributable Profit or Loss
For the Quarter Ended Chaitra, 2080 (Mid April 2024)
Figures in NPR
Particulars Chaitra 2080 Chaitra 2079
Net Profit for the Quarter end 130,509,106 1,782,329,999
Appropriations
1.1 Profit required to be appropriated to statutory reserve
a. General Reserve (26,101,821) (356,466,000)
b. Exchange Fluctuation Fund - -
c. Capital Redemption Reserve - -

d. Corporate Social Responsibility Fund (17,823,300)

5,143,094
e. Employees Training Fund (21,112,959) (12,951,784)
f. Others - -
-Employee Welfare Fund (1,305,091) -
-Debenture Redemption Reserve (291,666,667) (291,666,667)
Profit or (loss) before regulatory adjustment (335,043,444) (678,907,750)

Profit required to be transfer to Regulatory Reserve (842,488,117)

(1,418,271,242)
a. Interest receivable (-)/previous accrued interest received (+) (457,377,636) (940,420,167)

b. Short loan loss provision in accounts (-)/reversal (+)

-
c. Short provision for possible losses on investment (-)/reversal (+)

d. Short loan loss provision on Non Banking Assets (-)/reversal (+) -

10,372,439
e. Deferred tax assets recognised (-)/ reversal (+)
-
f. Goodwill recognised (-)/ impairment of Goodwill (+)
-
g. Bargain purchase gain recognised (-)/reversal (+)
-
h. Actuarial loss recognised (-)/reversal (+) (395,482,920) (477,851,075)
i. Other
-Fair Value of Investment Securities - -
- Others - -
Net Profit for Quarter end available for distribution (1,047,022,455) (314,848,994)
Opening Retained Earning 389,959 3,422,196,158
Adjustments
Transfer to General Reserve as per NRB letter No. BSD/offsite/
(1,197,874,084)
AGM/148/2079-80 dated on 2079/09/06
Distribution:
Bonus shares issued (288,118,097)
Cash Dividend paid (1,440,590,483)
Total Distributable profit or (loss) (1,046,632,495) 180,764,501
Annualized Distributable Profit/Loss per share (9.50) 1.64

NBL Interim Financial Report FY 2080/81-Q3 Page 10

Notes to the Interim Financial Statements
1. Basis of Preparation
The interim financial statements of the Bank have been prepared on accrual basis of accounting except the
Cash flow information which is prepared, on a cash basis, using the direct method. The interest income is
recognized on effective interest rate method.

The financial statements comprise the Condensed Statement of Financial Position, Condensed Statement of
Profit or Loss and Condensed Statement of Comprehensive Income, Statement of Changes in Equity,
Statement of Cash Flows and the Notes to the Accounts. The significant accounting policies applied in
preparation of financial statements are set out below in point number 5. These policies are consistently applied
to all the periods presented, except for the changes in accounting policies disclosed specifically.
The interim financial statements are presented in Nepalese Currency (NPR) (rounded to the nearest Rupee
unless otherwise stated), which is the bank’s functional currency. The Bank determines the functional currency
and items included in the financial statements are measured using that functional currency.
Reporting Period is a period from the first day of Shrawan (mid-July) of any year to the last day of quarter end
i.e. Ashwin (mid-October), Poush (mid-January), Chaitra (mid-April), Ashad (mid July) as per Nepalese
calendar.
The current period refers to 1st Shrawan 2080 to 30th Chaitra 2080 as per Nepalese Calendar corresponding to
17th July 2023 to 12th April 2024 as per English Calendar and corresponding previous year period is 1 st Shrawan
2079 to 30th Chaitra 2079 as per Nepalese Calendar corresponding to 17th July 2022 to 13th April 2023 as per
English calendar.

Period Nepalese Calendar English Calendar

1st Shrawan 2080 to 17th July 2023 to
Current Year Period 30th Chaitra 2080 12th April 2024

Previous Year Period 1st Shrawan 2079 to 17th July 2022 to

30th Chaitra 2079 13th April 2023

2. Statement of Compliance with NFRSs

The interim financial statements have been prepared in accordance with Nepal Financial Reporting Standard
(hereinafter referred as NFRS) and carve out laid down by the Institute of Chartered Accountant of Nepal.

The financial statements have been prepared on the going-concern basis.

The Bank presents its interim financial statements as per the format specified in directive 4 of unified directive
issued by NRB.

3. Use of Estimates, assumptions and judgments

The preparation of the Bank’s financial statement requires management to make judgments, estimates and
assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying
disclosures, as well as the disclosure of contingent liabilities. Management believes that the estimates used in
the preparation of the financial statements are prudent and reasonable estimates and underlying assumptions
are reviewed on an ongoing basis.
Information about assumptions, estimates and judgment used in preparation of interim financial statements for
2080/81 that has a significant risk of resulting in a material adjustment within the next financial year are:

NBL Interim Financial Report FY 2080/81-Q3 Page 11

  Key assumptions used in discounted cash flow projections.
 Measurement of defined benefit obligations.
 Provisions, commitments and contingencies.
 Determination of net realizable value.
 Determination of useful life of the property, plants and equipment.
 Assessment of the Bank’s ability to continue as going concern.
 Determination of fair value of financial instruments; and property and equipment.
 Impairment of financial and non-financial assets.
 Assessment of current as well as deferred tax.

4. Changes in accounting policies

The Bank has consistently applied the accounting policies to all periods presented in these interim financial
statements except for new or revised statements and interpretations implemented during the year. Comparative
financials have been grouped or regrouped to facilitate comparison, corrections of error and any changes in
accounting policies have been separately disclosed with detail explanations.

5. Significant Accounting policies

The principal accounting policies applied by the Bank in preparation of these interim financial statements are
presented below. These policies have been consistently applied to all the years presented unless stated
otherwise.
5.1 Basis of Measurement
The interim financial statements are prepared on the historical-cost basis except for the following material items
in the statement of financial position:
 Investment property is measured at cost under deemed cost approach.
 Liabilities for cash-settled, share-based-payment arrangements are measured at fair value.
 Derivative financial instruments are measured at fair value.
 Defined benefit schemes, surpluses and deficits are measured at fair value.
 Impairment of financial asset is measured at fair value and related disposal cost.

Estimates and underlying assumptions are reviewed on an ongoing basis and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable under
the circumstances. Actual results could differ from those estimates. The estimates and judgments used in the
preparation of the financial statements are continuously evaluated by the Bank. Any revisions to accounting
estimates are recognized prospectively in the period in which the estimates are revised and in the future
periods. The areas involving a higher degree of judgment or complexity, or areas where assumptions and
estimates are significant to the financial statements are disclosed in notes that follow.

Materiality and Aggregation

In compliance with NAS 1 - Presentation of Financial Statements, each material class of similar items is
presented separately in the financial Statements. Items of dissimilar nature or functions are presented
separately unless they are not material. Such presentation of line items is consistent with the format issued by
NRB.

5.2 Basis of consolidation

The Bank does not have any subsidiaries or special purpose entities over which it exercises control. Hence,
only standalone financial statement is prepared.

NBL Interim Financial Report FY 2080/81-Q3 Page 12

5.3 Cash and cash equivalent
Cash and cash equivalents include cash at vault and money at call and short notice which are subject to an
insignificant risk of changes in value including interest receivable on investment with maturity up to 3 month
or less. Cash and Cash equivalent are measured at amortized cost in the statement of financial position.

Statement of Cash Flows has been prepared by using the ‘Direct Method’ in accordance with NAS 07-
Statement of Cash Flows.

5.4 Financial assets and financial liabilities

Recognition
The Bank initially recognizes a financial asset or a financial liability in its statement of financial position
when, and only when, it becomes party to the contractual provisions of the instrument. The Bank initially
recognize loans and advances, deposits; and debt securities/ subordinated liabilities issued on the date that
they are originated which is the date that the Bank becomes party to the contractual provisions of the
instruments. Investments in equity instruments, bonds, debenture, Government securities, NRB bond or
deposit auction, reverse repos, outright purchase are recognized on trade date at which the Bank commits
to purchase/ acquire the financial assets. Regular way purchase and sale of financial assets are recognized
on trade date. All financial assets and liabilities are initially recognized at their cost value and are
subsequently presented as per NFRS based on the respective classification.

Classification
i. Financial Assets
The Bank classifies the financial assets as subsequently measured at amortized cost or fair value on the
basis of the Bank’s business model for managing the financial assets and the contractual cash flow
characteristics of the financial assets. The two classes of financial assets are as follows:

1. Financial assets measured at amortized cost

The Bank classifies a financial asset measured at amortized cost if both of the following conditions
are met:
a) The asset is held within a business model whose objective is to hold assets in order to collect
contractual cash flows and
b) The contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.

2. Financial asset measured at fair value

Financial assets other than those measured at amortized cost are measured at fair value. Financial
assets measured at fair value are further classified into two categories as below:

a) Financial assets at fair value through profit or loss

Financial assets are classified as fair value through profit or loss (FVTPL) if they are held for
trading or are designated at fair value through profit or loss. Upon initial recognition, transaction
costs are directly attributable to the acquisition are recognized in profit or loss as incurred. Such
assets are subsequently measured at fair value and changes in fair value are recognized in
Statement of Profit or Loss.

b) Financial assets at fair value through other comprehensive income

Investment in an equity instrument that is not held for trading and at the initial recognition, the
Bank makes an irrevocable election that the subsequent changes in fair value of the instrument is
to be recognized in other comprehensive income are classified as financial assets at fair value
though other comprehensive income. Such assets are subsequently measured at fair value and
changes in fair value are recognized in other comprehensive income.

NBL Interim Financial Report FY 2080/81-Q3 Page 13

ii. Financial Liabilities
The Bank classifies the financial liabilities as follows:

a) Financial liabilities at fair value through profit or loss

Financial liabilities are classified as fair value through profit or loss (FVTPL) if they are held for
trading or are designated at fair value through profit or loss. Upon initial recognition, transaction
cost is directly attributable to the acquisition are recognized in Statement of Profit or Loss as
incurred. Subsequent changes in fair value is recognized at profit or loss

b) Financial liabilities measured at amortized cost

All financial liabilities other than measured at fair value though profit or loss are classified as
subsequently measured at amortized cost using effective interest method.
Measurement
Financial assets at FVTOCI
On initial recognition, the Bank can make an irrevocable election (on an instrument-by instrument basis) to
present the subsequent changes in fair value in other comprehensive income pertaining to investments in
equity instruments. This election is not permitted if the equity investment is held for trading. These elected
investments are initially measured at fair value. Subsequently, they are measured at fair value with gains
and losses arising from changes in fair value recognized in other comprehensive income and accumulated
in the ‘Fair Value Reserve’. The cumulative gain or loss is not reclassified to Statement of Profit or Loss
on disposal of the investments.

A financial asset is held for trading if:

 It has been acquired principally for the purpose of selling it in the near term; or
 On initial recognition it is part of a portfolio of identified financial instruments that the bank manages
together and has a recent actual pattern of short-term profit-taking; or
 It is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.

Dividends on these investments in equity instruments are recognized in Statement of Profit or Loss when
the Bank’s right to receive the dividends is established, it is probable that the economic benefits associated
with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the
investment and the amount of dividend can be measured reliably. Dividends recognized in Statement of
Profit or Loss are included in the ‘Other income’ line item.

Financial assets at fair value through profit or loss (FVTPL)

Investments in equity instruments are classified as at FVTPL, unless the Bank irrevocably elects on initial
recognition to present subsequent changes in fair value in other comprehensive income for investments in
equity instruments which are not held for trading.

Debt instruments that do not meet the amortized cost criteria or FVTOCI criteria (see above) are measured
at FVTPL. In addition, debt instruments that meet the amortized cost criteria or the FVTOCI criteria but
are designated as at FVTPL are measured at FVTPL.

A financial asset that meets the amortized cost criteria or debt instruments that meet the FVTOCI criteria
may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly
reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or
recognizing the gains and losses on them on different bases.

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or
losses arising on re-measurement recognized in Statement of Profit and Loss. The net gain or loss
recognized in Statement of Profit and Loss incorporates any dividend or interest earned on the financial

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asset and is included in the ‘Other income’ line item. Dividend on financial assets at FVTPL is recognized
when the Bank’s right to receive the dividends is established, it is probable that the economic benefits
associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of
cost of the investment and the amount of dividend can be measured reliably.

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when the financial liability is held for trading or is designated
as at FVTPL.

A financial liability is classified as held for trading if:

 It has been incurred principally for the purpose of repurchasing it in the near term; or
 On initial recognition it is part of a portfolio of identified financial instruments that the bank manages
together and has a recent actual pattern of short-term profit-taking; or
 It is a derivative that is not designated and effective as a hedging instrument

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon
initial recognition if:
 such designation eliminates or significantly reduces a measurement or recognition inconsistency that
would otherwise arise;
 the financial liability forms part of a group of financial assets or financial liabilities or both, which is
managed and its performance is evaluated on a fair value basis, in accordance with the bank’s
documented risk management or investment strategy, and information about the Company is provided
internally on that basis; or
 it forms part of a contract containing one or more embedded derivatives, and NFRS 9 permits the entire
combined contract to be designated as at FVTPL in accordance with NFRS 9.

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement
recognized in Statement of Profit or Loss. The net gain or loss recognized in Statement of Profit or Loss
incorporates any interest paid on the financial liability and is included in the ‘Other income’ line item.

However, for non-held-for-trading financial liabilities that are designated as at FVTPL, the amount of
change in the fair value of the financial liability that is attributable to changes in the credit risk of that
liability is recognized in other comprehensive income, unless the recognition of the effects of changes in
the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch
in profit or loss, in which case these effects of changes in credit risk are recognized in Statement of Profit
or Loss. The remaining amount of change in the fair value of liability is always recognized in Statement of
Profit or Loss. Changes in fair value attributable to a financial liability’s credit risk that are recognized in
other comprehensive income are reflected immediately in retained earnings and are not subsequently
reclassified to Statement of Profit or Loss.

Financial liabilities subsequently measured at amortized cost

Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at
amortized cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities
that are subsequently measured at amortized cost are determined based on the effective interest method.
Interest expense that is not capitalized as part of costs of an asset is included in the ‘Finance Expenses’ line
item.

The effective interest method is a method of calculating the amortized cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments (including all fees paid or received that form an integral part of
the effective interest rate, transaction costs and other premiums or discounts) through the expected life of

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 the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial
recognition.
De-recognition
i. De-recognition of financial assets
The bank derecognizes a financial asset when the contractual rights to the cash flows from the financial
asset expire, or when it transfers the financial asset in a transaction in which substantially all the risks and
rewards of ownership of the financial asset are transferred or in which the Bank neither transfers nor retains
substantially all the risks and rewards of ownership and it does not retain control of the financial asset.

Any interest in such transferred financial assets that qualify for de-recognition that is created or retained by
the Bank is recognized as a separate asset or liability. On de-recognition of a financial asset, the difference
between the carrying amount of the asset, and the sum of
(i) The consideration received and
(ii) Any cumulative gain or loss that had been recognized in other comprehensive income is recognized
in retained earnings.
The Bank enters into transactions whereby it transfers assets recognized on its Statement of Financial
Position, but retains either all or substantially all of the risks and rewards of the transferred assets or a
portion of them. If all or substantially all risks and rewards are retained, then the transferred assets are not
derecognized. Transfers of assets with retention of all or substantially all risks and rewards include, for
example repurchase transactions.

ii. De-recognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or
expired. Where an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a de-recognition of the original liability and the recognition of a new liability.
The difference between the carrying value of the original financial liability and the consideration paid is
recognized in Statement of Profit or Loss.
Determination of fair value
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability (exit price) in
an orderly transaction between market participants at the measurement date in the principal or, in its
absence, the most advantageous market to which the Group has access at that date. The fair value of a
liability reflects its non-performance risk.

When available, the Bank measures the fair value of an instrument using the quoted price in an active
market for that instrument. A market is regarded as active if transactions for the asset or liability take place
with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no
quoted price in an active market, then the Bank uses valuation techniques that maximize the use of relevant
observable inputs and minimize the use of unobservable inputs. The chosen valuation technique
incorporates all of the factors that market participants would take into account in pricing a transaction.

The fair value measurement hierarchy is as follows:

Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets for
identical assets or liabilities.
Level 2 valuations are those with quoted prices for similar instruments in active markets or quoted prices
for identical or similar instruments in inactive markets and financial instruments valued using models where
all significant inputs are observable.
Level 3 portfolios are those where there are unobservable inputs of the instruments. The inputs are not
based on observable market data.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction
price i.e. the fair value of the consideration given or received. If the Bank determines that the fair value at

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initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price
in an active market for an identical asset or liability (Level 01 valuation) nor based on a valuation technique
that uses only data from observable markets (Level 02 valuation), then the financial instrument is initially
measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the
transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis over
the life of the instrument but not later than when the valuation is wholly supported by observable market
data or the transaction is closed out. In case the fair value is evidenced by a quoted price in an active market
for an identical asset or liability (Level 01 valuation), the difference between the transaction price and fair
value is recognized in profit or loss immediately.
Impairment
At each reporting date, the Bank assesses whether there is objective evidence that a financial asset or group
of financial assets not carried at fair value through profit or loss are impaired. A financial asset or a group
of financial assets is impaired when objective evidence demonstrates that a loss event has occurred after
the initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of the
asset(s) that can be estimated reliably.

Objective evidence that financial assets are impaired can include significant financial difficulty of the
borrower or issuer, default or delinquency by a borrower, restructuring of a loan or advance by the Bank
on terms that the Bank would not otherwise consider, indications that a borrower or issuer will enter
bankruptcy, the disappearance of an active market for a security, or other observable data relating to a group
of assets such as adverse changes in the payment status of borrowers or issuers in the group, or economic
conditions that correlate with defaults in the group. In addition, for an investment in an equity security, a
significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

In case of financial difficulty of the borrower, the Bank considers to restructure loans rather than take
possession of collateral. This may involve extending the payment arrangements and agreement of new loan
conditions. Once the terms have been renegotiated, any impairment is measured using the EIR method and
the loan is no longer considered past due. Management continually reviews renegotiated loans to ensure
that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an
individual or collective impairment assessment, calculated using the loan’s original EIR.

Impairment of financial assets measured at amortized cost

The Bank considers evidence of impairment for loans and advances measured at amortized cost at both
specific asset and collective level. The Bank first assesses individually whether objective evidence of
impairment exists for financial assets that are individually significant and that are not individually
significant are assessed on collectively.

If there is objective evidence on that an impairment loss has been incurred, the amount of the loss is
measured as the difference between the asset’s carrying amount and the present value of estimated future
cash flows. The carrying amount of the asset is reduced through the use of an allowance account and the
amount of the loss is recognized in profit or loss. Interest income continues to be accrued on the reduced
carrying amount and is accrued using the rate of interest used to discount the future cash flows for the
purpose of measuring the impairment loss.

Impairment of loans and advances portfolios are based on the judgments in past experience of portfolio
behavior. In assessing collective impairment, the Bank uses historical trends of the probability of default,
the timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether
current economic and credit conditions are such that the actual losses are likely to be greater or less than
suggested by historical trends. Default rates, loss rates and the expected timing of future recoveries are
regularly benchmarked against actual outcomes to ensure that they remain appropriate.

NBL Interim Financial Report FY 2080/81-Q3 Page 17

 Loans together with the associated allowance are written off when there is no realistic prospect of future
recovery and all collateral has been realized or has been transferred to the Bank. If in a subsequent year,
the amount of the estimated impairment loss increases or decreases because of an event occurring after the
impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting
the allowance account. If a write off is later recovered, the recovery is recognized in the ‘Non-operating
income’.
5.5 Trading assets
Interest income on all trading assets are considered to be incidental to the Bank’s trading operations and
are presented together with all other changes in fair value of trading assets and liabilities in net trading
income.
Interest expense on all trading liabilities are considered to be incidental to the Bank’s trading operations
and are presented together with all other changes in fair value of trading assets and liabilities in net trading
income.
5.6 Derivatives assets and derivative liabilities
For designated and qualifying fair value hedges, the cumulative change in the fair value of a hedging
derivative is recognized in the income statement in Net trading income. Meanwhile, the cumulative change
in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value
of the hedged item in the statement of financial position and is also recognized in the income statement in
Net trading income.

If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets
the criteria for hedge accounting, the hedge relationship is discontinued prospectively. For hedged items
recorded at amortized cost, the difference between the carrying value of the hedged item on termination
and the face value is amortized over the remaining term of the original hedge using the recalculated EIR
method. If the hedged item is derecognized, the unamortized fair value adjustment is recognized
immediately in the income statement.
5.7 Property and Equipment
a) Recognition and Measurement
Property and Equipment are recognized if it is probable that future economic benefits associated with the
assets will flow to the Bank and the cost of the asset can be reliably measured. The cost includes
expenditures that are directly attributable to the acquisition of the assets. Cost of self-constructed assets
includes followings:

 Cost of materials and direct labour;

 Any other cost directly attributable to bringing the assets to the working condition for their intended
use; and
 Capitalized borrowing cost

Property and equipment are measured at cost (for land using deemed cost at on the transition date) less
accumulated depreciation and accumulated impairment loss if any. Neither class of the property and
equipment are measured at revaluation model nor is their fair value measured at the reporting date.
Subsequent expenditure is capitalized if it is probable that the future economic benefits from the expenditure
will flow to the entity. Ongoing repairs and maintenance to keep the assets in working condition are
expensed as incurred.

Any gain or losses on de-recognition of an item of property and equipment is recognized in profit or loss.

b) Capital work in progress

Assets in the course of construction are capitalized in the assets under capital work in progress account
(CWIP). At the point when an asset is capable of operating at management’s intended use, the cost of
construction is transferred to the appropriate category of property, plant and equipment and depreciation

NBL Interim Financial Report FY 2080/81-Q3 Page 18

commences. Where an obligation (legal or constructive) exists to dismantle or remove an asset or restore a
site to its former condition at the end of its useful life, the present value of the estimated cost of dismantling,
removing or restoring the site is capitalized along with the cost of acquisition or construction upon
completion and a corresponding liability is recognized.

c) Depreciation
Property and equipment are depreciated from the date they are available for use on property on written
down value method over estimated useful lives as determined by the Management. Depreciation is
recognized in profit or loss. Land is not depreciated. Charging of depreciation is ceased from the earlier of
the date from which the asset is classified as held for sale or is derecognized.

The estimated useful lives of significant items of property and equipment for current year and comparative
periods are as follows:

Class of Assets Useful Life

Building 20 years
As per lease agreement (maximum to 10
Leasehold Properties
years)
Computer and Accessories 4 years
Vehicles 5 years
Furniture fixture & Equipment 4 years
Other Assets 6.66 years

Assets costing less than NPR 2,000 are fully depreciated in the year of purchase.

Goodwill / Intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortization and accumulated impairment losses.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the
cash generating unit level. Such intangibles are not amortized. The useful life of an intangible asset with an
indefinite life is reviewed annually to determine whether indefinite life assessment continues to be
supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective
basis.

The intangible asset with finite useful lives are amortized over the useful economic life and assessed for
impairment whenever there is an indication that the intangible asset may be impaired. The amortization
period and the amortization method for an intangible asset with a finite useful life are reviewed at least at
each financial year end. Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are accounted for by changing the amortization period or method,
as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible
assets with finite lives is recognized in the statement of profit or loss.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit
or loss when the asset is derecognized.

NBL Interim Financial Report FY 2080/81-Q3 Page 19

 Certain computer software costs are capitalized and recognized as intangible assets based on materiality,
accounting prudence and significant benefits expected to flow therefrom for a period longer than one year.
The estimated useful lives of significant items of intangible assets for current year and comparative periods
are as follows:

Class of Assets Useful Life

Computer Software 5 years

5.8 Investment Property

Investment property is the land or building or both held either for rental income or for capital appreciation
or for both, but not for sale in ordinary course of business and owner-occupied property. The Bank holds
investment property that has been acquired through the enforcement of security over the loan and advances.

Investment properties are measured initially at cost, including transaction costs. The carrying amount
includes the cost of replacing part of an existing investment property at the time that cost is incurred. If the
recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property.
Subsequent to initial recognition, investment properties are stated at fair value, which reflects market
conditions at the reporting date. Gains or losses arising from changes in the fair values of investment
properties are included in the income statement in the year in which they arise. Investment property which
initially measured at cost and subsequently at Cost Model. Accordingly, such properties are subsequently
measured at cost less accumulated depreciation and impairment loss if any.

Investment properties are derecognized either when they have been disposed of, or when the investment
property is permanently withdrawn from use and no future economic benefit is expected from its disposal.
Any gains or losses on the retirement or disposal of an investment property are recognized in the income
statement in the year of retirement or disposal.
5.9 Income tax
Bank is subject to tax laws of Nepal. Income Taxes have been calculated as per the provisions of the Income
Tax Act, 2058. Deferred tax is recorded on temporary differences between the tax bases of assets and
liabilities and their carrying amounts, at the rates that have been enacted or substantively enacted at the
reporting date. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable profits during the periods in which those temporary differences and tax law carry-forwards become
deductible. The Bank considers the expected reversal of deferred tax liabilities and projected future taxable
income making this assessment. The amount of the deferred tax assets considered realizable, however,
could be reduced in the near term if estimates of future taxable income during the carry-forward period are
reduced.

Income tax comprises current and deferred tax. Income tax expense is recognized in the statement of profit
and loss except to the extent it relates to items directly recognized in equity or in other comprehensive
income.
Current Tax
Current tax is the amount of tax payable based on the taxable profit for the year. Taxable profit differs from
‘profit before tax’ as reported in the statement of profit and loss because of items of income or expense that
are taxable or deductible in other years and items that are never taxable or deductible.

Current income tax assets and liabilities for the current period are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted by the reporting date in the countries where the Bank

NBL Interim Financial Report FY 2080/81-Q3 Page 20

 operates and generates taxable income. Current income tax assets and liabilities also include adjustments
for tax expected to be payable or recoverable in respect of previous periods.
Deferred Tax
Deferred tax is recognized on temporary differences arising between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is determined using tax rates (and laws) enacted or substantively enacted at the reporting date
and that are expected to apply when the related deferred tax asset is realized or the deferred tax liability is
settled. Deferred tax assets are reviewed at each reporting date and reversed if it is no longer probable that
the related tax benefits will be realized. The measurement of deferred tax reflects the tax consequences that
would follow from the manner in which the Bank expects, at the reporting date, to recover or settle the
carrying amount of its assets and liabilities.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax
credits and unused tax losses, to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, and the carry forward of unused tax credits and unused tax
losses can be utilized except:

i. Where the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss.
ii. In respect of deductible temporary differences associated with investments in subsidiaries, associates
and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and taxable profit will be
available against which the temporary differences can be utilized.

Deferred tax relating to items recognized in OCI is recognized in OCI. Deferred tax items are recognized
in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current
tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and
the same taxation authority.

5.10 Deposits, debt securities issued and subordinated liabilities

Bank deposits consist of money placed into the Bank by its customers. These deposits are made to deposit
accounts such as fixed deposit accounts, savings accounts, margin deposit accounts, call deposit accounts
and current accounts.

5.11 Provisions
Provisions are recognized when the bank has a present legal or constructive obligation as a result of a past
event, when it is probable that an outflow of resources will be required to settle the obligation and when the
amount can be reliably estimated.

The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, considering the risks and uncertainties surrounding the
obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows (when the effect of the time value of money is
material).

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 When some or all of the economic benefits required to settle a provision are expected to be recovered from
a third party, a receivable is recognized as asset if it is virtually certain that reimbursement will be received
and the amount of the receivable can be measured reliably.
A disclosure for contingent liabilities is made where there is:
 a possible obligation that arises from past events and whose existence will be confirmed only by
the occurrence or non-occurrence of one or more uncertain future events not wholly within the
control of the entity; or
 present obligation that arises from past events but is not recognized because:
o It is not probable that an outflow of resources embodying economic benefits will be
required to settle the obligation; or
o The amount of the obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the
control of the entity.

Commitments include the amount of purchase order (net of advances) issued to parties for completion of
assets.
Provisions, contingent liabilities, contingent assets and commitments are reviewed at each reporting period.

Provisions for onerous contracts are recognized when the expected benefits to be derived by the bank from
a contract are lower than the unavoidable costs of meeting the future obligations under the contract.

5.12 Revenue Recognition

Revenue comprises of interest income, fees and commission, foreign exchange income, cards income,
disposal income etc. Revenue is recognized to the extent it is probable that the economic benefits will flow
to the Bank and the revenue can be reliably measured. Revenue is not recognized during the period in which
its recoverability of income is not probable. The bases of incomes recognition are as below:

Interest income
Interest income is recognized in profit or loss using effective interest method. Effective interest rate is the
rate that exactly discounts the estimated future cash payments and receipts through the expected life of
financial asset or liability to the carrying amount of the asset or liability. The calculation of effective interest
rate includes all transactions cost and fee and points paid or received that are integral part of the effective
interest. The transaction costs include incremental costs that are directly attributable to the acquisition or
issue of financial assets.

Interest income presented in statement of profit and loss includes:

 Interest income on financial assets measured at amortized cost calculated on an effective interest rate
method. These financial assets include loans and advances including staff loans, investment in
government securities, investment in corporate bonds, investment in NRB Bond and deposit
instruments, reverse repos, inter banking lending etc.
 Interest on investment securities measured at fair value, calculated on effective interest rate.
 Income on discounted instruments like bills purchased, documents negotiation is recognized over the
period of discounting on accrual basis using effective interest rate.

Interest income on all trading assets are considered to be incidental to the Bank’s trading operations
and are presented together with all other changes in fair value of trading assets and liabilities in net
trading income.

NBL Interim Financial Report FY 2080/81-Q3 Page 22

 Fee and commission income
Fees and commission income that are integral to the effective interest rate on a financial asset are included
in measurement of effective interest rate. Other fees and commission income including management fee,
service charges, syndication fee, forex transaction commission, commission of issue of letter of credit and
guarantee are recognized as the related services are performed.
Dividend income
Dividend on investment in resident company is recognized when the right to receive payment is established.
Dividend income are presented in net trading income, net income from other financial instruments at fair
value through profit or loss or other revenue based on the underlying classification of the equity instruments.
Net trading income
Results arising from trading activities include all gains and losses from changes in fair value and related
interest income or expense and dividends for financial assets and financial liabilities held for trading. This
includes any ineffectiveness recorded in hedging transactions. Net trading income also includes gain on
foreign exchange transaction.

Net income from other financial instrument at fair value through Profit or Loss
Financial assets and financial liabilities classified in this category are those that have been designated by
management upon initial recognition. Management may only designate an instrument at fair value through
profit or loss upon initial recognition when the following criteria are met, and designation is determined on
an instrument-by-instrument basis:
 The designation eliminates or significantly reduces the inconsistent treatment that would otherwise
arise from measuring the assets or liabilities or recognizing gains or losses on them on a different
basis.
 The assets and liabilities are part of a group of financial assets, financial liabilities or both, which are
managed and their performance evaluated on a fair value basis, in accordance with a documented risk
management or investment strategy.
 The financial instrument contains one or more embedded derivatives, which significantly modify the
cash flows that would otherwise be required by the contract.

Financial assets and financial liabilities at fair value through profit or loss are recorded in the statement of
financial position at fair value. Changes in fair value are recorded in Net gain or loss on financial assets and
liabilities designated at fair value through profit or loss is recognized in statement of Profit or Loss. Interest
earned or incurred is accrued in Interest income or Interest expense, respectively, using the effective interest
rate (EIR), while dividend income is recorded in other operating income when the right to the payment has
been established.

5.13 Interest expense

Interest expense on all financial liabilities including deposits are recognized in profit or loss using effective
interest rate method. Interest expense on all trading liabilities are considered to be incidental to the Bank’s
trading operations and are presented together with all other changes in fair value of trading assets and
liabilities in net trading income.

5.14 Employees Benefits

a) Short Term Employee Benefits
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the
related service is provided. A liability is also recognized for the amount expected to be paid as bonus as
required by the prevailing Bonus Act. Obligations under short term employee benefits results based on past
service provided by the employee when the obligation can be estimated reliably.
Short-term employee benefits include all the following items (if payable within 12 months after the end of
the reporting period):

NBL Interim Financial Report FY 2080/81-Q3 Page 23

  wages, salaries and social security contributions;
 paid annual leave and paid sick leave;
 non-monetary benefits

b) Post-Employment Benefit Plan

Post-employment benefit plan includes followings:

i. Defined Contribution Plan

A defined contribution plan is a post-employment benefit plan under which an entity pays a fixed
contribution to a separate entity and has no legal or constructive obligation to pay future amounts.
Obligations for contributions to defined contribution plans are recognized as personnel expense in profit
or loss in the periods during which the related service are rendered by employees. Pre-paid contributions
are recognized as an asset to the extent that cash refund or reduction in future payments is available.
Contributions to a defined contribution plan being due for more than 12 months after the end of the
period in which the employee render the service are discounted at their present value. The following
are the defined contribution plan provided by the Bank to its employees:

a) Employees Provident Fund

In accordance with law, all employees of the Bank are entitled to receive benefits under the provident
fund, a defined contribution plan in which both the employee and the Bank contribute monthly at a
pre-determined rate (currently, 10% of the basic salary plus grades). Bank does not assume any future
liability for provident fund benefits other than its annual contribution.

b) Contributory Gratuity Plan

With effective from 01/04/2079, contributory gratuity plan has been introduced in the bank for the
new recruitments. As per the plan, both the employee and the bank contribute monthly at a pre-
determined rate (currently, 6 % of the basic salary plus grades for permanent employee and 8.33 % of
the basic salary for contract employee). Bank does not assume any future liability for such contributory
plan other than its annual contribution.

ii. Defined Benefit Plan

The Bank provides Pension & Gratuity Plan, Retirement Plan and Leave Encashment Plan (in terms of
Annual Leave and Sick Leave) as defined benefits to its employees. These benefits are post-
employment benefit plans and are paid based on length of service. These benefit plans are funded
whereas the Bank makes earmark investment of these funds. The gratuity plan provides for lump sum
payments to vested employees at retirement or upon death while in employment or on termination of
employment for an amount equivalent defined days’ eligible salary payable for each completed year
of service.
The pension plan provides for lump sum payments to vested employees at retirement or equated
payment till death of the employee (and half thereafter to the spouse of the employee). Further,
employees of the Bank are entitled to avail Annual Leave and Sick Leave. The employees can carry
forward the un-availed leave and are entitled to encash the cumulative leave at the time of the
retirement. The obligation under these plans are calculated by a qualified actuary every year using
projected unit credit method.
The following are the defined benefit plans provided by the Bank to its employees:

a) Gratuity (Other than Contributory Gratuity)

Bank provides for gratuity on accrual basis covering eligible employees in terms of Employee Service
Byelaws of the Bank. The plan provides for lump sum payments to vested employees at retirement or
upon death while in employment or on termination of employment for an amount equivalent defined

NBL Interim Financial Report FY 2080/81-Q3 Page 24

 days’ eligible salary payable for each completed years of service. The Bank accounts for the liability
for gratuity as per the actuarial valuation.

iii. Termination Benefits

Termination benefits are recognized as expense when the Bank is demonstrably committed, without
realistic possibility of withdrawal, to a formal plan to provide termination benefits to employees as a
result of an offer made to encourage voluntary redundancy. Termination benefits are recognized if the
Banks made an offer for voluntary redundancy, it is probable that the offer will be accepted and the
number of acceptances can be measured reliably. If the benefits are payable in more than 12 months
after the reporting date, they are discounted to their present value.

iv. Other Long-Term Employee Benefits

Other employee benefits which are payable in more than 12 months after the reporting date which are
not categorized under post-employment and termination benefits are categorized under Other Long-
Term Employee Benefits.

c) Leave Salary
The employees of the Bank are entitled to carry forward a part of their unavailed/unutilized leave
subject to a maximum limit. The employees can encash unavailed/unutilized leave partially in terms of
Employee Service Byelaws of the Bank. The Bank accounts for the liability for accumulated leave as
per the actuarial valuation.

5.15 Leases
The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the
arrangement at the inception date and requires an assessment of whether the fulfillment of the arrangement
is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset,
even if that right is not explicitly specified in an arrangement.
The Bank as a Lessee:
NFRS 16 is first time adoption in Nepalese BFIs since 1st Shrawan 2078. Now, there is no longer distinction
between operating lease and finance lease for lessee. The leases are capitalized and presented on the
statement of financial position as both assets, known as right of use (ROU) asset, and lease liabilities and
expenses of depreciation and interest expense on the statement of profit and loss.

Under NFRS 16, a lease is defined as a contract conveying an entity the right to utilize a specific asset for a
period of time in exchange for consideration where right to substantially all economic benefits from the use
of identified asset is established except short term lease and low value assets.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement
date to the end of the lease term.

The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the implicit interest rate / incremental borrowing rate i.e. market rate.
The Bank as a lessor
Leases in which the Bank does not transfer substantially all of the risks and benefits of ownership of the
asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added
to the carrying amount of the leased asset and recognized over the lease term on the same bases as rental
income. Contingent rents are recognized as revenue in the period in which they are earned.

NBL Interim Financial Report FY 2080/81-Q3 Page 25

5.16 Foreign Currency translation
The items included in the financial statements of the entity are measured using the functional currency of
the Bank which Nepalese Rupees is using the exchange rates prevailing at the dates when the transactions
were affected.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency
at the buying rate of exchange at the balance sheet date. Any resulting exchange differences are included in
the “Other Operating Income” in statement of profit or loss.

Non-monetary assets and liabilities that are measured at historical cost in a foreign currency are translated
into the functional currency using the rate of exchange at the date of initial transaction. Non-monetary item
assets and liabilities measured at fair value in a foreign currency are translated into the functional currency
using the rate of exchange at the date the fair value was determined.

Foreign exchange differences arising on settlement of monetary items is included in “Net Trading Income”
in statement of profit or loss.
5.17 Financial guarantee and loan commitment
The Bank makes available to its customers guarantees that may require that the Bank makes payments on
their behalf and enters into commitments to extend credit lines to secure their liquidity needs. Letters of
credit and guarantees (including standby letters of credit) commit the Bank to make payments on behalf of
customers in the event of a specific act, generally related to the import or export of goods. Such commitments
expose the Bank to similar risks to loans and are mitigated by the same control processes and policies.
5.18 Share capital and reserves
The Bank classifies the capital instruments as equity instruments or financial liabilities in accordance with
the substance with the contractual terms of the instruments. Equity is defined as residual interest in total assets
of an entity after deducting all its liabilities. Common shares are classified as equity of the Bank and
distributions thereon are presented in statement of changes in equity.

The Bank is required to maintain the capital adequacy ratio imposed by the regulator. The ratio is fixed at
11% for current year and the Bank has maintained the ratio as mentioned above under ratios as per NRB
directive as at Chaitra end 2080.

Incremental costs directly attributable to issue of an equity instruments are deducted from the equity.
5.19 Earnings per share including diluted earnings
Basic earnings per share is computed by dividing the profit/ (loss) for the year by the weighted average
number of equity shares outstanding during the year.

Diluted earnings per share is computed by dividing the profit/ (loss) for the year as adjusted for dividend,
interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential
equity shares, by the weighted average number of equity shares considered for deriving basic earnings per
share and the weighted average number of equity shares which could have been issued on the conversion of
all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion
to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive
equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a
later date.

There have been no transactions involving ordinary shares or potential ordinary shares between the reporting
date and the date of the completion of these financial statements which would require the restatement of
earnings per share.

NBL Interim Financial Report FY 2080/81-Q3 Page 26

 6. Segment Information
A. Information about reportable Segment
Banking Treasury Remittance Gove rnme nt Transaction All O the r Total

Correspondi

Correspondi

Correspondi

Correspondi

Correspondi

Correspondi
ng Previous

ng Previous

ng Previous

ng Previous

ng Previous

ng Previous
Quarter

Quarter

Quarter

Quarter

Quarter

Quarter
Current

Current

Current

Current

Current

Current
Quarter

Quarter

Quarter

Quarter

Quarter

Quarter
Particulars

year

year

year

year

year

year
Revenues from external customers 16,456,806,085 15,658,805,485 2,885,115,919 2,261,403,282 228,633,248 214,902,547 32,355,693 29,855,237 989,278,197 695,294,801 20,592,189,143 18,860,261,353

Intersegment revenues - - - - - - - - - - - -

Segment Profit / (Loss) before t ax 274,096,428 2,776,830,373 2,885,115,919 2,261,403,282 217,650,948 205,155,567 32,355,693 29,855,237 (2,820,739,525) (3,034,827,962) 588,479,464 2,238,416,497

Segment Assets 195,690,411,294 181,957,968,889 68,381,525,414 59,229,800,975 - - 900,316,722 1,925,901,439 44,800,629,368 35,646,188,426 309,772,882,799 278,759,859,728

Segment liabilities 262,354,800,601 230,154,498,121 - - - - - - 13,389,747,452 13,050,805,640 275,744,548,052 243,205,303,761

B. Reconciliation of reportable segment profit or loss

Corresponding Previous
Particulars Current Quarter
year Quarter

Total profit before tax for reportable segments 3,409,218,989 5,273,244,459

Profit before tax for other Segments (2,820,739,525) (3,034,827,962)
Elimination of inter-segment profit - -
Elimination of discontinued operation - -
Unallocated amounts: - -
- Other Corporate expenses (3,810,017,722) 3,730,122,763

7. Related Parties disclosures

The related parties of the Bank which meets the definition of related parties as defined in “NAS 24 Related
Parties Disclosure” are as follows:

7.1 Nepal Government

Nepal Government holds 51% shares in the bank and representation in the board of directors of the bank, is
considered to be related party to the bank.

7.2 Key Management Personnel (KMP)

The key management personnel are those persons having authority and responsibility of planning, directing
and controlling the activities of the entity, directly or indirectly including any director. The key management
of the Bank includes members of its Board of Directors, Chief Executive Officer, and other higher-level
employee of the Bank. The name of the key management personnel who were holding various positions in
the office during the year (As at Chaitra End 2080) were as follows:

Name of Directors
S.No. Name Position
1 Dr. Chandra Bahadur Adhikari Chairperson
2 Mr. Uttar Kumar Khatri Director
3 Mr. Ganga Prasad Gyawali Director
4 Ms. Shadhana Ghimire Director
5 Mr. Vivek S.J.B Rana Director
6 Mr. Vishnu Kumar Agrawal Director
7 Mr. Rochan Shrestha Director

NBL Interim Financial Report FY 2080/81-Q3 Page 27

 Key Management Personnel
S.No. Name Post
1 Tilak Raj Pandeya Chief Executive Officer
2 Samata Pant (Bhatta) Deputy Chief Executive Officer
3 Laxman Poudel Assistant Chief Executive officer
4 Bishwo Raj Baral Assistant Chief Executive officer
5 Prakash Kumar Adhikari Assistant Chief Executive officer
6 Hom Bahadur Khadka Assistant Chief Executive officer

7.3 Compensation to Key Management Personnel

The members of Board of Directors are entitled for meeting allowances. Salary and allowances are provided
to Chief Executive Officer and other member of the management team. Salary and Allowances paid to the
Chief Executive Officer is based on the contract entered by the Bank with him whereas compensation paid to
other members of management team are governed by Employees Byelaws and decisions made by
management time to time in this regard. In addition to salaries and allowances, non-cash benefits like vehicle
facility, subsidized rate employees’ loan, and termination benefits are also provided to KMP.

The details relating to compensation paid to key management personnel (Director’s only) were as follows:

S.No. Particulars Up to Chaitra End 2080

1 Director’s Fee 1,476,400
2 Other Expenses 1,692,608
Total 3,169,008

The details relating to compensation paid to key management personnel other than directors were as follows:
S.No. Name Upto Chaitra End 2080
1 Tilak Raj Pandeya (CEO) 1,616,207
2 Krishna Bahadur Adhikari (Former CEO) 1,971,217
3 Samata Pant (Bhatta) 1,976,110
4 Laxman Paudel 1,972,681
5 Bishwo Raj Baral 1,919,728
6 Prakash Kumar Adhikari 2,074,374
7 Hom Bahadur Khadka 2,230,424
Total 13,760,742
Note:
 Besides above remuneration, other facilities like staff loan facilities and vehicle facilities were
provided to KMPs as per the staff bylaws of the bank.

8 Dividend paid (aggregate or per share) separately for ordinary shares or other shares
During the reporting period bank has not distributed any dividend.
9 Issues, repurchase and repayment of debt and equity securities
No any issues, repurchase and repayment of debt and equity securities.
10 Events after interim period
There are no material events after reporting date affecting financial status as on Chaitra End 2080.

NBL Interim Financial Report FY 2080/81-Q3 Page 28

11 Effect of changes in the composition of the entity during the interim period including merger and
acquisition
No such changes during the interim period as on Chaitra End 2080.
12 Use of Carve-outs Adjustment

12.1 For Impairment Calculation

An entity shall assess at the end of each reporting period whether there is any objective evidence that a
financial asset or group of financial assets measured at amortized cost is impaired. If any such evidence
exists, the entity shall apply paragraph 63 of NAS 39: Financial Instruments: Recognition and
Measurement, to determine the amount of any impairment loss unless the entity is bank or financial
institutions registered as per Bank and Financial Institutions Act, 2073. Bank and Financial Institutions
shall measure impairment loss on loan and advances as higher of amount derived as per prudential norms
prescribed by Nepal Rastra Bank and amount determined as per paragraph 63. However, bank and
financial institutions shall apply paragraph 63 of NAS 39: Financial Instruments: Recognition and
Measurement to determine the amount of impairment loss on financial assets other than loan and
advances.

IMPAIRMENT AS PER NAS 39

Using the carve-out issued by Institute of Chartered Accountant of Nepal, the higher of the Impairment
loss as per NFRS and Impairment as per Norms of NRB is taken into consideration for impairment loss
on loan and advances for preparation of interim financial statement.

IMPAIRMENT AS PER NAS 39

Loans and advances to Customers As on Chaitra end 2080
Loans and advances to Customers (A) 197,394,616,302
Less:
Impairment allowances (a + b) 7,831,088,375
Collective Allowances (a) 3,205,647,458
Individual Allowances (b) 4,625,440,917
Impairment as percentage of Total Loans and advances 3.97%

The impact of the application of carve-out in the interim financial statement is as under

Particulars Amount (NPR)

Impairment Loss as per NFRS 7,831,088,375
Impairment Loss as per norms of NRB 9,946,901,664

Using the carve-out issued by Institute of Chartered Accountant of Nepal, the higher of the above is taken
into consideration for impairment loss on loan and advances for preparation of interim financial
statement.

12.2 For Using Effective Interest rate

During the reporting period Bank has used the exemption for not calculating Interest Income using
Effective Interest Rate (EIR) as Bank has considered such calculation to be impracticable. Accordingly,
Bank has used Normal interest rate to charge interest income.

12.3 Interest calculation on Impaired Loan and advances

NAS 39 requires when a financial asset or a group of similar financial assets has been written down as a
result of an impairment loss, interest income is thereafter recognized using the rate of interest used to

NBL Interim Financial Report FY 2080/81-Q3 Page 29

 discount the future cash flows for the purpose of measuring the impairment loss. The Bank has not
considered fees and transaction cost being immaterial. The interest income has been calculated using EIR.

Interest income on loan and advances that are overdue for more than 180 days are not recognized as
Interest income citing the recoverability of such amount.

NBL Interim Financial Report FY 2080/81-Q3 Page 30

 Disclosure as per Securities Registration and Issuance Regulation, 2073
(Related to sub-Rule (1) of Rule 26)
Quarterly Detail as of Chaitra end 2080 (April 12, 2024)

1. Financial Statements

A. Statement of Financial Position and statement of profit or Loss

Published along with this report.

B. Related Party Disclosure

Nepal Government holds 51% shares in the bank and has representation on the board of directors of
the bank and hence it is considered to be a related party to the bank.

The directors, chief executive officer and other key management personnel are also considered to be
related parties to the bank. No transaction between the bank and KMPs was observed other than as
prescribed under the employee's bylaws of the bank and relating to remuneration.

C. Major Financial Highlights

Earnings per Share 1.18 33.83
NPR %
a. (Annualized) d. Liquidity
b. Market Value per Share NPR 212.50 e. Return on Assets % 0.06
179.44 Net worth per 246.42
c. Price Earnings Ratio (Times) NPR
f. Share

2. Management Analysis

a. Net profit up to this quarter for the current FY 2080/81 has decreased in comparison to the same
period of the previous year as a result of increment in Interest expenses, Fee and Commission
Expenses and impairment charges for loans and advances.
b. Retained Earnings has decreased due to transfer to the General Reserve, transfer to regulatory
reserves for actuarial loss, increased accrued interest income.
c. An increase in NPL and impairment charges due to a stagnant economy has impacted the
profitability and reserves of the bank during the quarter under review.
d. The liquidity of the bank is sufficient to meet the lending opportunities. However, low credit
demand in the overall banking industry during the review period has been a great concern.
e. The objective of business diversification and improvement in qualitative services covering remote
area branches has resulted in banking access and financial inclusiveness along with customer-
friendly services nationwide as per the need of time and client.
f. The bank is constantly improving its IT infrastructure to allow automated transactions through
digital channels and make the bank more competitive, along with the initiation of procurement for
new competitive CBS.
g. The bank has prepared a robust risk management and AML/CFT policy as per international norms
and is implementing them thoroughly.

3. Detail relating to legal action

Except in the normal course of banking business, no lawsuits of a material nature have been filed
by the bank and 14 cases have been filed against the bank. No notice and information has been
received by the bank to date regarding any cases filed for and against promoters/directors/on
account of violation of prevailing laws or commission of criminal offenses or financial crime.

NBL Interim Financial Report FY 2080/81-Q3 Page 31

4. Analysis of share transaction and progress of the bank

a. Management view on share transaction of the bank at securities market –

The share transaction of the bank takes place in the secondary market of Nepal Stock Exchange
through open share market operation. The management ‘s view on this is neutral. Its transactions
in volume has increased.

b. Maximum, minimum and last share price of the bank including total number of shares traded and
days of transaction during the quarter.

Maximum Price: NPR 242.70

Minimum Price: NPR 212.50
Last Price: NPR 212.50
Transaction volume: 3,603,969 shares
Days of transaction: 58

5. Problems and Challenges

Internal
 Non-performing loan and its management.
 Increased operational cost.
 Retention of qualified and skilled human resources.
 Strengthening operational efficiencies to minimize possible inherent risk due to an increase in
branch network.
 Risk Management of increasing digitization and digital products.

External
 Adverse impact on businesses due to ongoing global economic crisis.
 Difficulty in lending due to economic stagnation and low government spending.
 Fluctuation in Liquidity position and interest rates.
 Regulated interest spread squeezing the margin.
 Stiff competition from other Bank and Financial Institutions.
 Fluctuation in foreign exchange rate along with increasing inflation rate.

Strategy
 Focus on controlled business growth and profit management.
 Digitize the banking services to increase operating efficiency and continue to introduce new
banking products.
 Explore new sectors for the non-interest income of the bank.
 Focus on Prudent Assets and Liability Management of the bank.
 Maintain effectiveness in customer service and dealings with simplified processes.
 Focus on Risk Management and Internal Control along with compliance of applicable Rules and
Regulations.

6. Corporate Governance

The Board of the bank is the apex body that is responsible and accountable to the shareholders for the
maintenance of good governance in the bank.

NBL Interim Financial Report FY 2080/81-Q3 Page 32

 The Risk Management Committee, which is a sub-committee of the Board, is entrusted to review the
overall risks of the bank and recommend the Board and management for policy prescription when
required. The Sub-committee meets regularly as and when required.

The Audit Committee, which is a sub-committee of the Board, reviews the audit reports of all the branches
and departments/divisions of the bank and gives feedback to the Board and the Senior Management.

The Staff Service Facility Committee, which is a sub-committee of the Board, reviews the facilities and
services of the staffs of bank and gives feedback to the Board and the Senior Management.

The Credit Committee of the bank is the CEO-level committee comprising the senior executive
representing various business functions of the bank to approve, review, and monitor the credit portfolio
of the bank. This committee also recommends the credit-related proposal to the Board for approval.

The ALM Committee, which is led by the CEO, is responsible for the prudent management of the
Financials of the bank. It reviews interest rate risk, liquidity risk, and market risk of the bank regularly.

The AML Committee is the committee formed under the board of directors of the bank to monitor and
review the AML/CFT and CPF Activities of the Bank.

The Governance Division, which is headed by the Board Secretary, is responsible for monitoring the
governance in the bank and report to the Board and concerned regulatory bodies.

7. Declaration by the Chief Executive Officer on the Truthfulness and Accuracy of information

I, as at the date, hereby individually accept responsibility for the accuracy of the information and details
contained in this report. I also hereby declare that to the best of my knowledge and belief, the information
contained in this report is true, accurate and complete and there are no other matters concealed, the
omission of which shall adversely affect the informed investment decision by the investors.

Chief Executive Officer

NBL Interim Financial Report FY 2080/81-Q3 Page 33