NIC ASIA Bank Limited

Consolidated Statement of Financial Position

As on Third Quarter of FY 2076/77 (As at 30 Chaitra 2076)
Amount in NPR
Group Bank
Particular This Quarter Ending Immediate Previous Year This Quarter Ending Immediate Previous Year
Ending Ending

Assets

Cash and cash equivalent 12,529,881,230 20,485,247,232 12,290,846,498 20,214,540,268

Due from Nepal Rastra Bank 6,899,221,455 16,097,915,246 6,899,221,455 16,097,915,246

Placement with Bank and Financial Institutions 3,368,981,398 383,950,000 3,368,981,398 383,950,000

Derivative financial instruments. 7,083,198,253 7,006,010,607 7,083,198,253 7,006,010,607

Other trading assets 25,019,198 175,793,419 9,440,000 7,440,000

Loan and advances to B/FIs 11,751,163,408 5,423,285,128 14,251,163,408 6,923,285,128

Loans and advances to customers 168,488,201,614 147,049,664,210 161,187,180,955 142,574,005,954

Investment securities 20,706,386,240 18,320,559,017 20,224,696,029 18,152,959,017

Current tax assets 74,193,649 - - -

Investment in subsidiaries - - 1,264,500,000 1,204,500,000

Investment in associates - - - -

Investment property 436,987,108 275,938,557 436,987,108 275,938,557

Property and equipment 3,027,191,885 2,620,265,206 2,986,382,568 2,583,719,788

Goodwill and Intangible assets 114,943,929 113,483,110 107,560,149 110,490,299

Deferred tax assets 3,232,381 - - -

Other assets 2,751,290,296 2,178,396,222 2,731,602,109 2,162,294,264

Total Assets 237,259,892,043 220,130,507,955 232,841,759,931 217,697,049,129

Group Bank
Particular This Quarter Ending Immediate Previous Year This Quarter Ending Immediate Previous Year
Ending Ending

Liabilities

Due to Bank and Financial Instituions 12,197,219,376 15,629,175,761 9,091,214,054 13,927,924,793

Due to Nepal Rastra Bank 587,138,515 314,541,457 587,138,515 314,541,457

Derivative financial instruments 6,892,443,089 6,913,408,934 6,892,443,089 6,913,408,934

Deposits from customers 187,505,935,858 171,982,399,774 186,817,759,426 171,428,410,596

Borrowing - - - -

Current Tax Liabilities 830,257,057 242,944,821 823,583,746 242,944,821

Provisions - - - -

Deferred tax liabilities 161,490,447 175,040,445 161,490,447 178,272,826

Other liabilities 2,626,692,148 2,099,866,079 2,341,504,230 2,045,713,090

Debt securities issued 9,673,873,498 7,710,097,099 9,673,873,498 7,710,097,099

Subordinated Liabilities - - - -

Total liabilities 220,475,049,987 205,067,474,371 216,389,007,005 202,761,313,616

Equity

Share capital 9,717,651,568 8,834,228,698 9,717,651,568 8,834,228,698

Share premium - - - -

Retained earnings 968,363,285 2,215,910,907 660,542,157 2,112,880,839

Reserves 6,098,827,203 4,012,893,979 6,074,559,201 3,988,625,977

Total equity attributable to equity holders 16,784,842,056 15,063,033,584 16,452,752,926 14,935,735,514

Non-controlling interest - - - -

Total equity 16,784,842,056 15,063,033,584 16,452,752,926 14,935,735,514

Total liabilities and equity 237,259,892,043 220,130,507,955 232,841,759,931 217,697,049,129

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 NIC ASIA Bank Limited
Consolidated Statement of Profit or Loss
For the Quarter ended 30 Chaitra FY 2076/77
Amount in NPR
Group Bank
Particular Current Year Previous Year Corresponding Current Year Previous Year Corresponding
This Quarter Upto this Quarter (YTD) This Quarter Upto this Quarter (YTD) This Quarter Upto this Quarter (YTD) This Quarter Upto this Quarter (YTD)
Interest income 5,357,679,873 15,877,612,967 5,040,440,924 14,826,292,792 5,241,442,814 15,413,319,215 4,850,469,253 14,506,650,938
Interest expense 3,450,657,916 10,085,870,284 3,231,359,288 9,265,919,310 3,366,308,460 9,890,725,222 3,134,427,714 9,182,993,021
Net interest income 1,907,021,957 5,791,742,683 1,809,081,636 5,560,373,483 1,875,134,354 5,522,593,993 1,716,041,539 5,323,657,917
Fees and commission income 615,570,672 2,092,811,783 683,408,726 1,629,407,740 552,248,490 1,960,301,941 646,346,286 1,515,787,702
Fees and commission expense 18,657,514 132,385,749 19,911,744 90,193,944 7,451,503 115,294,628 19,911,744 90,193,944
Net fee and commission income 596,913,158 1,960,426,034 663,496,982 1,539,213,796 544,796,987 1,845,007,313 626,434,542 1,425,593,758
Net interest, fee and commission income 2,503,935,114 7,752,168,717 2,472,578,618 7,099,587,279 2,419,931,341 7,367,601,306 2,342,476,081 6,749,251,675
Net trading income 110,021,759 285,291,436 108,424,211 264,463,700 111,211,272 285,291,436 108,424,211 264,463,700
Other operating income 327,526,927 345,715,474 4,487,654 51,921,715 291,061,010 309,249,557 4,486,704 52,810,753
Total operating income 2,941,483,801 8,383,175,627 2,585,490,483 7,415,972,693 2,822,203,623 7,962,142,299 2,455,386,996 7,066,526,127
Impairment charge/(reversal) for loans and 826,778,180 1,030,183,004 363,644,024 988,998,966 799,359,341 992,042,594 347,343,690 949,655,251
other losses
Net operating income 2,114,705,620 7,352,992,623 2,221,846,459 6,426,973,727 2,022,844,283 6,970,099,705 2,108,043,306 6,116,870,877
Operating expense
Personnel expenses 721,744,141 2,086,184,119 612,946,820 1,866,100,612 688,911,204 1,988,146,380 584,591,890 1,810,939,550
Other operating expense 593,427,990 1,258,051,648 356,323,158 1,050,962,425 575,925,671 1,204,794,893 295,161,103 934,314,016
Depreciation & Amortisation 66,359,178 183,779,015 141,385,731 147,663,001 57,136,130 173,151,627 141,385,731 147,663,001
Operating Profit 733,174,310 3,824,977,842 1,111,190,751 3,362,247,689 700,871,279 3,604,006,805 1,086,904,582 3,223,954,309
Non operating income 1,946,091 14,725,952 5,967,322 28,144,290 1,946,091 14,725,952 5,967,322 28,144,290
Non operating expense 5,028,124 40,621,196 - - 5,028,124 40,621,196 - -
Profit before income tax 730,092,278 3,799,082,598 1,117,158,073 3,390,391,979 697,789,246 3,578,111,561 1,092,871,905 3,252,098,599
Income tax expense
Current Tax 221,207,488 1,141,904,584 335,147,422 1,017,117,594 211,516,579 1,075,613,273 327,861,571 975,629,580
Deferred Tax - - - -
Profit for the period 508,884,789 2,657,178,013 782,010,651 2,373,274,385 486,272,667 2,502,498,288 765,010,333 2,276,469,019

Group Bank
Particular Current Year Previous Year Corresponding Current Year Previous Year Corresponding
This Quarter Upto this Quarter (YTD) This Quarter Upto this Quarter (YTD) This Quarter Upto this Quarter (YTD) This Quarter Upto this Quarter (YTD)
Profit or loss for the period 508,884,789 2,657,178,013 782,010,651 2,373,274,385 486,272,667 2,502,498,288 765,010,333 2,276,469,019
Other comprehensive income
a) ltems that will not be reclassified to profit or loss
-Gains/(losses) from investments in equity instruments measured at fair value (134,453,455) (55,941,265) 40,428,771 113,775,137 (134,453,455) (55,941,265) 40,428,771 113,775,137
-Gain/(loss) on revaluation
-Actuarial Gain/loss on defined benefit plans
-lncome tax relating to above items
Net other compressive income that will not be reclassified to profit or loss
b) ltems that are or may be reclassified to profit or loss
-Gains/(losses) on cash flow hedge
-Exchange Gains/(losses) (arising from translating financial assets of foreign operation)
-lncome tax relating to above items 40,336,036 16,782,379 (14,737,788) (34,132,541) 40,336,036 16,782,379 12,128,631 34,132,541
Net other compressive income that are or may be reclassified to profit or loss
c) Share of other comprehensive income of associate accounted as per equity method
Other comprehensive income for the period, net of income tax (94,117,418) (39,158,885) 25,690,983 79,642,596 (94,117,418) (39,158,885) 28,300,140 79,642,596
Total Comprehensive lncome for the period 414,767,371 2,618,019,128 807,701,634 2,452,916,981 392,155,249 2,463,339,403 793,310,473 2,356,111,615

Profit attributable to:

Equity holders of the Bank 508,884,789 2,657,178,013 782,010,651 2,373,274,385 486,272,667 2,502,498,288 765,010,333 2,276,469,019
Non-controlling interest - - - - - -
Profit for the period 508,884,789 2,657,178,013 782,010,651 2,373,274,385 486,272,667 2,502,498,288 765,010,333 2,276,469,019

Basic earnings per share 36.83 36.18 34.68 34.71

Dituted earnings per share 36.83 36.18 34.68 34.71

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 NIC ASIA Bank Limited
Consolidated Statement of Profit or Loss
For the Quarter ended 30 Chaitra FY 2076/77

Amount in NPR
Group Bank
Ratios as per NRB Directive Current Year Previous Year Corresponding Current Year Previous Year Corresponding
This Quarter Upto this Quarter (YTD) This Quarter Upto this Quarter (YTD) This Quarter Upto this Quarter (YTD) This Quarter Upto this Quarter (YTD)
Capital fund to RWA 12.31% 13.30% 12.11% 13.10%
Non-performing loan (NPL) to total loan 0.75% 0.43% 0.75% 0.45%
Total loan loss provision to Total NPL 214% 303% 219% 297%
Cost of Funds 7.13% 7.14% 7.02% 7.09%
Credit to Deposit Ratio 77.73% 76.51% 78.18% 77.55%
Base Rate 9.69% 9.35% 9.61% 9.30%
Interest Rate Spread 5.15% 5.70% 4.92% 5.60%

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 NIC ASIA Bank Limited
Condensed Consolidated Statement of Changes in Equity
For the Period (Shrawan 1, 2076 to Chaitra 30, 2076 ) ended Third Quarter FY 2076/77
Group
Amount in NPR
Attributable to Equity holders of the Bank
Particulars Share Capital Share Pre- General Reserve Exchange Regulatory Reserve Fair Value Reserve Revaluation Retained Earning Other Reserve Total Non-controlling Total Equity
mium Equalisation Reserve Interest
Balance as at Sawan 1, 2075 8,031,116,998 - 1,825,152,950 38,372,154 455,575,876 (3,713,951) 44,244,462 953,991,664 11,680,792,670 - 11,680,792,670
336,052,515.263
Profit for the year 3,154,980,470 3,154,980,470 3,154,980,470
Other Comprehensive income - - - - - 283,805,930 - 11,690,063.90 295,495,994 295,495,994
Total comprehensive income - - - - - 283,805,930 - 3,154,980,470 11,690,064 3,450,476,464 - 3,450,476,464
Transfer to reserve during the year - - 626,718,354 635,106 272,070,442 - 11,959,548 (1,074,774,837) 163,930,842 539,455 539,455
Transfer from the reserve during the year - - - - - - - 41,831,188 (53,600,314) (11,769,126) (11,769,126)
Contribution from and distributions to owner - -
- -
Share issued - -
Share based payments - -
Dividends to equity holders: - -
Bonus Shares issued 803,111,700 - - - - - - (803,111,700) - 0.40 0
Cash Dividend Paid - - - - - - - (57,005,880) - (57,005,880) (57,005,880)
Other - - - - - - - - -
Total contributions by and distributions: 803,111,700 - - - - - - (860,117,579) - (57,005,879) - (57,005,879)
Balance as at Asar End, 2076 8,834,228,698 - 2,451,871,304 39,007,260 727,646,318 280,091,979 56,204,010 2,215,910,907 458,073,108 15,063,033,584 - 15,063,033,584

Balance as at Sawan 1, 2076 8,834,228,698 - 2,451,871,304 39,007,260 727,646,318 280,091,979 56,204,010 2,215,910,907 458,073,108 15,063,033,584 - 15,063,033,584
Profit for the year 2,657,178,013 2,657,178,013 2,657,178,013
Other Comprehensive income - - - - (39,158,885) - (39,158,885) (39,158,885)
Total comprehensive income - - - - - (39,158,885) - 2,657,178,013 - 2,618,019,128 - 2,618,019,128
Transfer to reserve during the year - - 500,499,658 1,384,524 1,055,590,185 - - (1,942,430,958) 567,617,743 182,661,151 182,661,151
Transfer from the reserve during the year - - - - - - - - - - -
Contribution from and distributions to owner - -
- -
Share issued - -
Share based payments - -
Dividends to equity holders: - -
Bonus Shares issued 883,422,870 - (883,422,870) (0) (0)
Cash Dividend Paid - - (1,078,871,807) (1,078,871,807) (1,078,871,807)
Other - -
Total contributions by and distributions: 883,422,870 - - - - - - (1,962,294,677) - (1,078,871,808) - (1,078,871,808)
Balance as at Chaitra End, 2076 9,717,651,568 - 2,952,370,961 40,391,783 1,783,236,503 240,933,094 56,204,010 968,363,285 1,025,690,851 16,784,842,056 - 16,784,842,056

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 Bank
Attributable to Equity holders of the Bank

Particulars Share Capital Share Pre- General Reserve Exchange Regulatory Reserve Fair Value Reserve Revaluation Retained Earning Other Reserve Total Non-controlling Total Equity
mium Equalisation Reserve Interest
Balance as at Sawan 1, 2075 8,031,116,998 - 1,825,152,950 38,372,154 455,575,876 (3,713,951) 44,244,462 943,654,556 336,052,515.263 11,670,455,561 - 11,670,455,561
Profit for the year 3,023,282,666 3,023,282,666 3,023,282,666
Other Comprehensive income - - - - - 283,805,930 - 11,690,064 295,495,995 - 3,318,778,661
Total comprehensive income - - - - - 283,805,930 - 3,023,282,666 11,690,064 3,318,778,661 - 3,318,778,661
Transfer to reserve during the year - - 604,656,534 635,106 272,070,442 11,959,548 (1,050,506,835) 161,724,660 539,455 539,455

Transfer from the reserve during the year - - - - 41,831,188 (53,600,314) (11,769,126) (11,769,126)

Contribution from and distributions to owner - -

- -
Share issued - -
Share based payments - -
Dividends to equity holders: - -
Bonus Shares issued 803,111,700 - - - - - - (803,111,700) - - -
Cash Dividend Paid - - - - - - - (42,269,037) - (42,269,037) (42,269,037)
Other

Total contributions by and distributions: 803,111,700 - - - - - - (845,380,737) - (42,269,037) - (42,269,037)

Balance as at Asar End, 2076 8,834,228,698 - 2,429,809,484 39,007,260 727,646,318 280,091,979 56,204,010 2,112,880,839 455,866,926 14,935,735,514 - 14,935,735,514

Balance as at Sawan 1, 2076 8,834,228,698 - 2,429,809,484 39,007,260 727,646,318 280,091,979 56,204,010 2,112,880,839 455,866,926 14,935,735,514 - 14,935,735,514
Profit for the year 2,502,498,288 2,502,498,288 2,502,498,288
Other Comprehensive income - - (39,158,885) (39,158,885) (39,158,885)

Total comprehensive income - - - - - (39,158,885) - 2,502,498,288 - 2,463,339,403 - 2,463,339,403

Transfer to reserve during the year - - 500,499,658 1,384,524 1,055,590,185 (2,094,999,349) 567,617,743 30,092,760 30,092,760

Transfer from the reserve during the year - - - -

Contribution from and distributions to owner - -

- -
Share issued - -
Share based payments - -
Dividends to equity holders: - -
Bonus Shares issued 883,422,870 - (883,422,870) - -
Cash Dividend Paid - - (976,414,751) (976,414,751) (976,414,751)
Other - -
Total contributions by and distributions: 883,422,870 - - - - - - (1,859,837,621) - (976,414,751) - (976,414,751)
Balance as at Chaitra End, 2076 9,717,651,568 - 2,930,309,141 40,391,783 1,783,236,503 240,933,094 56,204,010 660,542,157 1,023,484,669 16,452,752,926 - 16,452,752,926

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 NIC ASIA Bank Limited
Consolidated Statement of Cash Flow Statement
For the Quarter ended 30 Chaitra FY 2076/77
Amount in NPR
Bank
Particular "Upto This Quarter" Corresponding Previous Year "Upto This Quarter" Corresponding Previous Year
Up to This Quarter Up to This Quarter
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received 13,587,578,305 14,778,937,681 13,136,843,650 14,459,295,826
Fees and other income received 2,092,811,783 1,628,857,740 1,960,301,941 1,515,237,702
Dividend received - 6,369,544 - 6,369,544
Receipts from other operating activities 604,845,246 300,741,955 568,379,329 301,630,993
Interest paid (9,287,186,039) (9,265,919,310) (9,092,040,977) (9,182,993,021)
Commission and fees paid (132,385,749) (90,193,944) (115,294,628) (90,193,944)
Cash Payment to Employees (2,021,874,523) (1,504,756,323) (1,927,980,046) (1,449,595,261)
Other expense paid (1,258,051,648) (634,549,397) (1,204,794,893) (517,900,988)
"Operating cash flows before changes in operating 3,585,737,376 5,219,487,946 3,325,414,376 5,041,850,852
assets and liabilities"

(Increase)/Decrease in Operating Assets (21,760,436,456) (40,826,244,819) (20,046,121,635) (39,376,600,489)

Due from Nepal Rastra Bank 9,200,259,550 2,419,588,795 9,200,259,550 2,419,588,795
Placement with Bank and financial institutions (3,095,299,551) (3,507,162,575) (3,095,299,551) (3,507,162,575)
Other trading assets 150,774,221 60,875 (2,000,000) -
Loan and advances to Bank and financial institutions (6,327,878,280) (1,283,654,325) (7,327,878,280) (3,283,654,325)
Loans and advances to customers (21,017,244,832) (30,098,185,584) (18,153,742,019) (26,700,928,892)
Other assets (671,047,565) (8,356,892,005) (667,461,336) (8,304,443,493)

Increase/(Decrease) in operating liabilities 14,029,293,590 45,870,766,124 12,044,380,772 44,196,995,057

Due to Bank and financial institutions (3,431,956,386) 15,030,861,019 (4,836,710,738) 15,129,869,393
Due to Nepal Rastra Bank 272,597,058 (11,182,002) 272,597,058 (11,182,002)
Deposit from customers 15,523,536,083 14,940,447,248 15,389,348,830 14,545,572,743
Borrowings - 1,289,592,202 - -
Other liabilities 1,665,116,834 14,621,047,657 1,219,145,622 14,532,734,922
Net cash flow from operating activities before tax paid (4,145,405,490) 10,264,009,252 (4,676,326,488) 9,862,245,420
Income taxes paid (1,548,731,100) (1,017,117,594) (1,348,628,140) (975,629,580)
Net cash flow from operating activities (5,694,136,590) 9,246,891,658 (6,024,954,628) 8,886,615,840

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investment securities (3,174,390,499) (786,672,055) (2,920,300,288) (1,057,266,954)
Receipts from sale of investment securities 788,563,276 - 788,563,276 -
Purchase of property and equipment (572,339,974) (717,933,140) (557,448,687) (705,058,916)
Receipt from the sale of property and equipment - 18,739,598 - 18,739,598
Purchase of intangible assets (19,826,539) (34,233,910) (15,435,569) (37,107,428)
Receipt from the sale of intangible assets - - - -
Purchase of investment properties (161,048,551) (247,181,456) (161,048,551) (247,181,456)
Receipt from the sale of investment properties - 3,705,669 - 3,705,669
Interest received 751,970,517 6,680,677 738,631,263 6,680,677
Dividend received 40,887,616 14,000,000 40,887,616 14,000,000
Net cash used in investing activities (2,346,184,154) (1,742,894,617) (2,086,150,940) (2,003,488,812)

CASH FLOWS FROM FINANCING ACTIVITIES

Receipt from issue of debt securities 1,963,776,399 4,380,544,243 1,963,776,399 4,380,544,243
Repayment of debt securities - - - -
Receipt from issue of subordinated liabilities - - - -
Repayment of subordinated liabilities - - - -
Receipt from issue of shares - 803,111,700 - 803,111,700
Dividends paid (1,080,137,412) (44,620,012) (977,680,356) (44,620,012)
Interest paid (798,684,245) (370,820,078) (798,684,245) (370,820,078)
Other receipt/payment - - 0.00 -
Net cash from financing activities 84,954,742 4,768,215,852 187,411,798 4,768,215,852

Net increase (decrease) in cash and cash equivalents (7,955,366,002) 12,272,212,893 (7,923,693,770) 11,651,342,881
Cash and cash equivalents at Shrawan 1, 2076 20,485,247,232 8,173,703,208 20,214,540,268 8,132,486,809
Effect of exchange rate fluctuations on cash and cash
equivalents held
Cash and cash equivalents at Chaitra end 2076 12,529,881,230 20,445,916,102 12,290,846,498 19,783,829,690

Statement of Distributable Profit or Loss

Net Profit for the period Ended Third Quarter of FY76/77 2,502,498,288
1. Appropriations
1.1 Profit required to be appropriated to statutory reserve 1,039,409,164
a. General Reserve 500,499,658
b. Capital Redemption Reserve 512,500,000
c. Exchange Fluctuation Fund 1,384,524
d. Corporate Social Responsibity Fund 25,024,983
e. Employees Training Fund -
f. Other -
1.2 Profit required to be transfer to Regulatory Reserve 1,055,590,185
a. Transfer to Regulatory Reserve 1,055,590,185
b. Transfer from Regulatory Reserve
Net Profit for the period end Chaitra 2076 quarter available for distribution 407,498,939

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
1. Reporting Entity

NIC ASIA Bank Limited (“NICA” or “the Bank”) is a limited liability company domiciled in Nepal which
has been in operation in Nepal since 1998. The Bank is registered with the Office of Company
Registrar as a public limited company and carries out commercial banking activities in Nepal under
the license from Nepal Rastra Bank (Central Bank of Nepal) as Class “Ka” licensed institution. The
Bank registered, and corporate office are at Kathmandu, Nepal.

The Bank offers full commercial banking services of banking products and services including loans
and advances, deposits, trade finance, e-commerce services, bullion, etc. to wide range of clients
encompassing individuals, corporates, multinationals, large public sector companies, government
corporations, etc. as authorized by the Nepal Rastra Bank. The Bank is listed on Nepal Stock
Exchange and its stock symbol is “NICA”.

1.1 Subsidiaries

The Bank has two subsidiaries namely NIC ASIA Capital Limited and NIC ASIA Laghubitta
Bittiya Sanstha Limited.

a. NIC ASIA Capital Limited is wholly owned subsidiary of the Bank and was incorporated on
15th May 2016 as a public limited company as per the Companies Act 2063 and licensed
by Securities Board of Nepal under the Securities Businessperson (Merchant Banker)
Regulations, 2008 to provide merchant banking and investment banking services.

b. NIC ASIA Laghubitta Bittiya Sanstha Limited is also a wholly owned subsidiary of the Bank
and was incorporated on 25th July 2017 as a public limited company under Companies
Act, 2063 and licensed by Nepal Rastra Bank as “D” class financial institution having reg
istered office at Jajarkot, Nepal. The principle activities involved extending banking
products and services to the deprived sectors/communities.

c. NIC ASIA Securities Limited is a wholly owned subsidiary of NIC ASIA Bank Limited which
is one of the leading commercial bank of Nepal. NIC ASIA Securities Limited company reg
istration number at Companies Registrar is 210976/075/076. NIC ASIA Securities Limited
is formed with an objective of providing security brokerage services, market maker, market
dealer and related service. Company has not started its operation as on 17th October,
2019.
“The Group” represents the Bank and its subsidiaries.

2. Basis of Preparation

The interim financial statements of the Bank have been prepared in accordance with Nepal
Financial Reporting Standards (NFRS) : NAS 34 Interim Financial Reporting as published by
the Accounting Standards Board (ASB) Nepal and pronounced by The Institute of Chartered
Accountants of Nepal (ICAN).

The disclosures made in the condensed consolidated interim financials information have been
limited on the format prescribed by Nepal Rastra Bank.

The interim financial statements comprise of:-

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 l Condensed Consolidated Statement of Financial Position
l Condensed Consolidated Statement of Profit or Loss and Condensed Consolidated Statement
of Other Comprehensive Income shown in a single statement
l Condensed Consolidated Statement of Changes in Equity
l Condensed Consolidated Statement of Cash Flows
l Notes to the Interim Financial Statements and
l Ratios as per NRB Directive.

The interim financial statements do not include all of the information required for a complete set of
NFRS financial statements. However, selected explanatory notes are included to explain events
and transactions that are significant to an understanding of the changes in the Bank’s financial
position and performance since the last annual financial statements.

The Bank has applied following carve out issued by The Institute of Chartered Accountants
of Nepal:

1. NAS 34: Interim Financial Reporting

In para 2, if an entity’s interim financial report is described as complying with NFRSs, it must
comply with all of the requirements of this Standard. Paragraph 19 requires certain disclosures
in that regard. However, an entity shall not require to restate its corresponding previous interim
period balance if it is impracticable to restate.

2. NAS 39: Financial Instruments: Recognition and Measurement

a) Impairment

In para 58, 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 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. Such entities shall measure impairment loss on loan and
advances as the higher of amount derived as per norms prescribed by Nepal Rastra Bank
for loan loss provision and amount determined as per paragraph 63; and shall apply paragraph
63 to measure the impairment loss on financial assets other than loan and advances. The
entity shall disclose the impairment loss as per this carve-out and the amount of impairment
loss determined as per paragraph 63.

The impacts of the application of this carve- out in the reporting period is as under:

Impairment Loss as per NFRS NPR 921,403,634

Impairment Loss as per norms of NRB NPR 2,854,283,013

The higher of two above i.e.NPR 2,854,283,013 has been taken in account for impairment
loss on loan and advances for the reporting period.

b) Impracticability to determine transaction cost of all previous years which is the part of
effective interest rate

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 In para 9, The effective interest rate is the rate that exactly discounts estimated future cash
payments or receipts through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the financial asset or
financial liability. When calculating the effective interest rate, an entity shall estimate cash
flows considering all contractual terms of the financial instrument (for example, prepayment,
call and similar options) but shall not consider future credit losses. The calculation includes
all fees and points paid or received, unless it is immaterial or impracticable to determine
reliably, between parties to the contract that are an integral part of the effective interest
rate (NAS 18 Revenue), transaction costs and all other premiums or discounts. There
is a presumption that the cash flows and the expected life of a group of similar financial
instruments can be estimated reliably. However, in those rare cases when it is not possible
to estimate reliably the cash flows or the expected life of a financial instrument (or group of
financial instruments), the entity shall use the contractual cash flows over the full contractual
term of the financial instrument (or group of financial instruments).

c) Impracticability to determine interest income on amortized cost

In para AG 93, once 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 discount the future cash flows for the purpose of measuring
the impairment loss. Interest income shall be calculated by applying effective interest rate
to the gross carrying amount of a financial asset unless the financial asset is written off
either partially or fully.

2.1 Reporting period and approval of financial statements

Reporting Period is a period from the first day of Shrawan (mid of July) of any year to the last
day of quarter end, i.e. Ashoj (mid of October), Poush (mid of January), Chaitra (mid of April)
and Asadh (mid of July) as per Nepali calendar.
Period Nepali Calendar English Calendar
Current Year Period 1st Magh 2076 to 15th January 2019 to
30th Chaitra 2076 12th Apritl 2020
Previous Year Period 1st Kartik 2076 to 18th October 2019 to
29thPoush 2076 14th January 2020

2.2 Functional and Presentation Currency

The interim financial statements are presented in Nepalese Rupees (NPR) which is the Bank’s
functional currency. All financial information presented in NPR has been rounded to the
nearest rupee except where indicated otherwise.

3. Statement of Compliance with NFRSs

The interim financial statements have been prepared in accordance with Nepal Financial Reporting
Standards (NFRS) : NAS 34 Interim Financial Reporting, as published by the Accounting Standards
Board (ASB) Nepal and pronounced by The Institute of Chartered Accountants of Nepal (ICAN) and

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 in compliance with BAFIA 2073, Unified Directives 2076 issued by Nepal Rastra Bank and all other
applicable laws and regulations. The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual financial statements, and should
be read in conjunction with the Bank’s annual financial statements as at 31st Ashad, 2076.

4. Use of estimates, assumptions and judgements

In preparing these interim financial statements, management has made judgements and estimates
that affect the application of accounting policies and the reported amounts of assets and liabilities,
income and expense. Management believes that the estimates used in the preparation of the
financial statements are prudent and reasonable. Actual results may differ from these estimates.
The Bank reviews such estimates and underlying assumptions periodically. The revision to
accounting estimates are recognised in the period in which the estimates are revised and are applied
prospectively. The significant judgements made by management in applying the Bank’s accounting
policies and the key sources of estimation uncertainty were the same as those described in the last
annual financial statements.

5. Changes in Accounting Policies

The accounting policies adopted while preparing these interim financial statments are consistent
with those applied in the Bank’s annual financial statements for the year ended Ashad 31, 2076.

6. Significant Accounting Policies

The accounting policies and methods of computation adopted in the preparation of the interim
financial statements are consistent with those adopted and disclosed in the Bank’s annual financial
statements for the financial year ended 31st Ashad 2076.

6.1 Basis of Measurement

The financial statements have been prepared on historical cost basis except for the following
material items in the statement of financial position:

l Derivative financial instruments are measured at fair value.

l Financial instruments at fair value through profit or loss are measured at fair value.
l Investment property is measured at fair value.
l The liability for defined benefit obligations is recognized as the present value of the
defined benefit obligation less the net total of the plan assets, plus unrecognized actuarial
gains, less unrecognized past service cost and unrecognized actuarial losses.

6.2 Basis of Consolidation

a) Non-Controlling Interest (NCI)

For each business combination, the Bank elects to measure any non-controlling interests in
the acquiree either:

l at fair value; or
l at their proportionate share of the acquire identifiable net assets, which are

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 generally at fair value.

Changes in the Bank’s interest in a subsidiary that do not result in a loss of control are
accounted for as transactions with owners in their capacity as owners. Adjustments to non-
controlling interests are based on a proportionate amount of the net assets of the subsidiary.
No adjustments are made to goodwill and no gain or loss is recognised in profit or loss.

b) Subsidiaries

Subsidiaries are the entities controlled by the Bank. The Bank controls an entity if it is
exposed, or has rights, to variable returns from its involvement with the investee and
has the ability to affect those returns through its power over the investee. The Financial
Statements of subsidiaries are included in the Consolidated Financial Statements from
the date that control commences until the date that control ceases. The Bank reassesses
whether it has control if there are changes to one or more of the elements of control. In
preparing the consolidated financial statements, the financial statements are combined
line by line by adding the like items of assets, liabilities, equity, income, expenses and
cash flows of the parent with those of its subsidiary. The carrying amount of the parent’s
investment in subsidiary and the parent’s portion of equity of subsidiary are eliminated in
full. All intra group assets and liabilities, equity, income, expenses and cash flows relating
to transactions between entities of the group (such as interest income and technical fee)
are eliminated in full while preparing the consolidated financial statements.

c) Loss of Control

Upon the loss of control, the Bank derecognizes the assets and liabilities of the subsidiary,
carrying amount of non controlling interests and the cumulative translation differences
recorded in equity related to the subsidiary. Further parent’s share of components
previously recognized in Other Comprehensive Income (OCI) is reclassified to profit or loss
or retained earnings as appropriate. Any surplus or deficit arising on the loss of control is
recognized in the profit or loss. If the Group retains any interest in the previous subsidiary,
then such interest is measured at fair value at the date that control is lost. Subsequently,
it is accounted for as an equity-accounted investee or in accordance with the Group’s
accounting policy for financial instruments depending on the level of influence retained.

d) Transaction Elimination on Consolidation

All intra-group balances and transactions, and any unrealized income and expenses
(except for foreign currency transaction gains or losses) arising from intra-group
transactions are eliminated in preparing the consolidated financial statements. Unrealized
losses are eliminated in the same way as unrealized gains, but only to the extent that there
is no evidence of impairment.

6.3 Cash and Cash equivalent

Cash and cash equivalents include cash in hand, balances with BFIs, money at call & short notice
and highly liquid financial assets with original maturities of three months or less from the acquisition
dates that are subject to an insignificant risk of changes in their fair value and are used by the
Bank in the management of its short-term commitments. Cash and cash equivalents are carried at
amortized cost in the statement of financial position.

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 6.4 Financial Assets and Financial Liabilities

a) 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 dateat which the Bank
commits to purchase or sell the asset.

b) 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;

i. Financial assets measured at amortized cost
The Bank classifies a financial asset measured at amortized cost if both of the
following conditions are met:

l The asset is held within a business model whose objective is to hold assets
in order to collect contractual cash flows and
l 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.

ii. 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:

l 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 cost is 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.

l Financial assets at fair value through other comprehensive income

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 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.

II. Financial Liabilities

The Bank classifies its financial liabilities, other than financial guarantees and loan
commitments, as follows;

l Financial Liabilities at Fair Value through Profit or Loss

Financial liabilities are classified as fair value through profit or loss 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 Statement of Profit or Loss as incurred.
Subsequent changes in fair value is recognized at profit or loss

l Financial Liabilities measured at amortised 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 rate method.

c) Measurement

i. Initial Measurement

A financial asset or financial liability is measured initially at fair value plus or minus,
for an item not at fair value through profit or loss, transaction costs that are directly
attributable to its acquisition or issue. Transaction cost in relation to financial assets
and liabilities at fair value through profit or loss are recognized in Statement of Profit
or Loss.

ii. Subsequent Measurement

A financial asset or financial liability is subsequently measured either at fair value

or at amortized cost based on the classification of the financial asset or liability.
Financial asset or liability classified as measured at amortized cost is subsequently
measured at amortized cost using effective interest rate method. The amortized
cost of a financial asset or financial liability is the amount at which the financial asset
or financial liability is measured at initial recognition minus principal repayments,
plus or minus the cumulative amortization using the effective interest method of
any difference between that initial amount and the maturity amount, and minus any
reduction for impairment or uncollectibility. Financial assets classified at fair value
are subsequently measured at fair value. The subsequent changes in fair value of
financial assets at fair value through profit or loss are recognized in Statement of

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 Profit or Loss whereas of financial assets at fair value through other comprehensive
income are recognized in other comprehensive income.

iii. Derecognition

Derecognition of Financial Assets

The Bank derecognizes a financial asset when the contractual rights to the cash flows
from the financial asset expire, or it transfers the rights to receive the contractual cash
flows 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
derecognition that is created or retained by the Bank is recognized as a separate
asset or liability. On derecognition of a financial asset, the difference between the
carrying amount of the asset (or the carrying amount allocated to the portion of the
asset transferred), and the sum of (i) the consideration received (including any new
asset obtained less any new liability assumed) and (ii) any cumulative gain or loss
that had been recognized in other comprehensive income is recognized in profit or
loss. In transactions in which the Bank neither retains nor transfers substantially all
the risks and rewards of ownership of a financial asset and it retains control over
the asset, the Bank continues to recognize the asset to the extent of its continuing
involvement, determined by the extent to which it is exposed to changes in the
value of the transferred asset.

Derecognition of Financial Liabilities

A financial liability is derecognized when the obligation under the liability is

discharged or canceled 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 derecognition 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.

iv. Determination of Fair Value

Fair value is the amount for which an asset could be exchanged, or a liability
settled, between knowledgeable, willing parties in an arm’s length transaction on
the measurement date. The fair value of a liability reflects its non-performance risk
The fair values are determined according to the following hierarchy:

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.

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 Level 3 portfolios are those where at least one input, which could have a significant
effect on the instrument’s valuation, is not based on observable market data.

When available, the Bank measures the fair value of an instrument using quoted
prices in an active market for that instrument. A market is regarded as active if
quoted prices are readily and regularly available and represent actual and regularly
occurring market transactions on an arm’s length basis. If a market for a financial
instrument is not active, the Bank establishes fair value using a valuation technique.
Valuation techniques include using recent arm’s length transactions between
knowledgeable, willing parties (if available), reference to the current fair value of
other instruments that are substantially the same, discounted cash flow analyses.
The best evidence of the fair value of a financial instrument at initial recognition
is the transaction price – i.e. the fair value of the consideration given or received.
However, in some cases, the fair value of a financial instrument on initial recognition
may be different to its transaction price. If such fair value is evidenced by comparison
with other observable current market transactions in the same instrument (without
modification) or based on a valuation technique whose variables include only data
from observable markets, then the difference is recognized in profit or loss on initial
recognition of the instrument. In other cases, the difference is not recognized in
profit or loss immediately but is recognized over the life of the instrument onan
appropriate basis or when the instrument is redeemed, transferred or sold, or the
fair value becomes observable. All unquoted equity investments are recorded at
cost, considering the non-trading of promoter shares up to the date of balance
sheet, the market price of such shares could not be ascertained with certainty.
Hence, these investments are recognized at cost net of impairment, if any.

v. Impairment

At each reporting date the Bank assesses whether there is any indication that
an asset may have been impaired. If such indication exists, the recoverable
amount is determined. A financial asset or a group of financial assets is impaired
and impairment losses are incurred if, and only if, there is objective evidence of
impairment as a result of one or more events occurring after the initial recognition
of the asset (a loss event), and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or group of financial assets that
can be reliably estimated.

The Bank considers the following factors in assessing objective evidence of

impairment:

• Whether the counterparty is in default of principal or interest payments.

• When a counterparty files for bankruptcy and this would avoid or delay
discharge of its obligation.
• Where the Bank initiates legal recourse of recovery in respect of a credit
obligation of the counterpart.
• Where the Bank consents to a restructuring of the obligation, resulting in a
diminished financial obligation, demonstrated by a material forgiveness of
debt or postponement of scheduled payments.
• Where there is observable data indicating that there is a measurable
decrease in the estimated future cash flows of a group of financial assets,

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 although the decrease cannot yet be identified with specific individual
financial assets.

The Bank considers evidence of impairment for loans and advances and held-
to-maturity investment securities at both a specific asset and collective level.
All individually significant loans and advances and held-to-maturity investment
securities are assessed for specific impairment. Those found not to be specifically
impaired are then collectively assessed for any impairment that has been incurred
but not yet identified.

Loans and advances and held-to-maturity investment securities that are not
individually significant are collectively assessed for impairment by grouping together
loans and advances and held-to-maturity investment securities with similar risk
characteristics. Impairment test is done on annual basis for trade receivables and
other financial assets based on the internal and external indication observed.

In assessing collective impairment, the Bank uses statistical modelling of 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 thatthe 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.
Impairment losses on assets measured at amortised cost

Financial assets carried at amortised cost (such as amounts due from Banks, loans
and advances to customers as well as held– to–maturity investments is impaired,
and impairment losses are recognized, only if there is objective evidence as a result
of one or more events that occurred after the initial recognition of the asset. The
amount of the loss is measured as the difference between the asset’s carrying
amount and the deemed recoverable value of loan.

Loans and advances to customers with significant value (Top 50 borrowers and
borrowers classified as bad as per Nepal Rastra Bank Directive) are assessed for
individual impairment test. The recoverable value of loan is estimated on the basis
of realizable value of collateral and the conduct of the borrower/past experience of
the bank. Assets that are individually assessed and for which no impairment exists
are grouped with financial assets with similar credit risk characteristics and

collectively assessed for impairment. The credit risk statistics for each group of the
loan and advances are determined by management prudently being based on the
past experience. For the purpose of collective assessment of impairment bank has
categorized assets in to six broad products as follows:

1. Term Loan
2. Auto Loan
3. Home Loan
4. Personal Loan
5. Working Capital Loan
6. Others

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 If, in a subsequent year, the amount of the estimated impairment loss increases
or decreases because of an event occurring after the impairment was recognised,
the previously recognised impairment loss is increased or reduced by adjusting the
other reserves and funds (impairment reserve) in other comprehensive income and
statement of changes in equity. If a future write–off is later recovered, the recovery
is credited to the ‘Income Statement’.

As per Loan Loss Provision of Nepal Rastra Bank Loan loss provisions in respect
of nonperforming loans and advances are based on management’s assessment
of the degree of impairment of the loans and advances, subject to the minimum
provisioning level prescribed in relevant NRB guidelines. Provision is made for
possible losses on loans and advances including bills purchased at 1% to 100% on
the basis of classification of loans and advances, overdraft and bills purchased in
accordance with NRB directives

Impairment of investment in equity instrument classified as fair value through other

comprehensive income

Where objective evidence of impairment exists for available-for-sale financial

assets, the cumulative loss (measured as the difference between the amortised
cost and the current fair value, less any impairment loss on that financial asset
previously recognised in the statement of profit or loss) is reclassified from equity
and recognised in the profit or loss. A significant or prolonged decline in the fair value
of an equity security below its cost is considered, among other factors in assessing
objective evidence of impairment for equity securities. If, in a subsequent period,
the fair value of a debt instrument classified as availablefor-sale increases and the
increase can be objectively related to an event occurring after the impairment loss
was recognised, the impairment loss is reversed through the statement of profit or
loss. Impairment losses recognised in the profit or loss on equity instruments are
not reversed through the profit or loss.

6.5 Trading Assets

Trading assets and liabilities are those assets and liabilities that the Bank acquires or incurs
principally for the purpose of selling or repurchasing in the near term or holds as part of a portfolio
that is managed together for short-term profit or position taking. Trading assets and liabilities are
initially recognized at fair value and subsequently measured at fair value in the statement of financial
position, with transaction costs recognized in profit or loss. All changes in fair value are recognized
as part of net trading income in profit or loss as regarded as fair value through profit & loss account.

6.6 Derivatives Assets and Derivative Liabilities

Derivatives held for risk management purposes include all derivative assets and liabilities that are
not classified as trading assets or liabilities. Derivatives held for risk management purposes are
measured at fair value in the statement of financial position. For qualification of hedge accounting
and cost benefits along with materiality, Bank has not adopted hedge accounting for certain
derivatives held for risk management.

6.7 Property and Equipment

i. Recognition and Measurement

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 The cost of an item of property and equipment shall be recognized as an asset, initially
recognized at cost, if, and only if:

• It is probable that future economic benefits associated with the item will flow to the entity;
and
• the cost of the item can be measured reliably.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost
of self-constructed assets includes the following:

• the cost of materials and direct labor;

• any other costs directly attributable to bringing the assets to a working condition for their
intended use;
• when the Bank has an obligation to remove the asset or restore the site, an estimate of the
costs of dismantling and removing the items and restoring the site on which they are
located;
• Capitalized borrowing costs.

The Bank adopts cost model for entire class of property and equipment.Neither class of the property
and equipment are measured at revaluation model nor is their fair value measured at the reporting
date. The items of property and equipment are measured at cost less accumulated depreciation and
any accumulated impairment losses. Purchased software that is integral to the functionality of the
related equipment is capitalized as part of that equipment. Subsequent expenditure is capitalized if
it is probable that the future economic benefits from the expenditure will flow to the Bank. Ongoing
repairs and maintenance to keep the assets in working condition are expensed as incurred. Any
gain or loss on disposal of an item of property and equipment (calculated as the difference between
the net proceeds fromdisposal and the carrying amount of the item) is recognized within other
income in profit or loss. Assets with a value of less than NPR 10,000 are charged off to revenue
irrespective of their useful life in the year of purchase.

ii. Capital Work in Progress

Fixed assets under construction and cost of assets not ready for use are shown as
capital work in progress.

iii. Depreciation

Depreciation on other assets is calculated using the straight- line method to allocate their cost to
their residual values over their estimated useful life as per management judgement as follows:
Group Useful Life (In years)
Computer 5
Metal Furniture 10
Office Equipment 10
Vehicle 10
Wooden Furniture 5
Building 50
Leasehold Lower of 15 years or Lease period

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 iv. Derecognition

The carrying amount of Property and Equipment shall be derecognized on disposal or when
no future economic benefits are expected from its use or disposal. The gain or loss arising
from the derecognition of an item of property and equipment shall be included in profit or
loss when the item is derecognized (unless on a sale & lease back). The gain shall not be
classified as revenue. Depreciation method, useful lives and residual value are reviewed at
each reporting date and adjusted, if any.

6.8 Intangible Assets/Goodwill

Goodwill

Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired
in Business Combination is recognized as goodwill. Following initial recognition, goodwill is
measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment
annually, or more frequently, if events or changes in circumstances indicate that the carrying
value may be impaired.

Acquire Intangible Assets

Intangible assets are initially measured at fair value, which reflects market expectations of the
probability that the future economic benefits embodied in the asset will flow to the Bank and
are amortized on the basis of their expected useful lives.

Computer Software

Acquired computer software licenses are capitalized on the basis of the costs incurred to
acquire and bring to use the specific software. Costs associated with the development of
software are capitalized where it is probable that it will generate future economic benefits in
excess of its cost. Computer software costs are amortized on the basis of expected useful
life. Costs associated with maintaining software are recognized as an expense as incurred. At
each reporting date, these assets are assessed for indicators of impairment. In the event that
an asset’s carrying amount is determined to be greater than its recoverable amount, the asset
is written down immediately. Software is amortized on a straight-line basis in profit or loss
over its estimated useful life, from the date that it is available for use. The estimated useful life
of software for the current and comparative periods is five years. Software assets with costs
less than Rs. 10,000 are charged off on purchases as revenue expenditure. Amortization
methods, useful lives and residual values are reviewed at each reporting date and adjusted
if appropriate.

6.9 Investment Property/ Non-Current Assets Held for Sale

Investment Property

Investment properties include land or land and buildings other than those classified as property
and equipment and non-current assets held for sale. Generally, it includes land, land and
building acquired by the Bank as non-banking assets but not sold as on the reporting date.
The Bank holds investment property that has been acquired through enforcement of security
over the loans and advances.

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 Non-Current Assets Held for Sale

Non-current assets (such as property) and disposal groups (including both the assets and
liabilities of the disposal groups) are classified as held for sale and measured at the lower of
their carrying amount and fair value less cost to sell when:

(i) their carrying amounts will be recovered principally through sale;

(ii) they are available-for-sale in their present condition; and
(iii) their sale is highly probable.

Immediately before the initial classification as held for sale, the carrying amounts of the assets
(or assets and liabilities in a disposal group) are measured in accordance with the applicable
accounting policies described above.

6.10 Income Tax

Tax expenses comprise current and deferred tax. Current and deferred tax are recognized in
profit and loss except to the extent they relate to items recognized directly in equity or in other
comprehensive income.

Current tax

Current tax is the expected tax payable or recoverable on the taxable income or loss for
the year, using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years. Current tax payable also includes any
tax liability arising from the declaration of dividends.

Deferred Tax

Deferred tax is recognized in respect of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. Deferred income tax is determined using tax rate applicable to the Bank as at
the reporting date which is expected to apply when the related deferred income tax asset is
realized or the deferred income tax liability is settled.

Deferred tax assets are recognized where it is probable that future taxable profit will be
available against which the temporary differences can be utilized.

6.11 Deposits, Debt securities issued and sub ordinated liabilities

Deposit

The bank accepts deposits form its customers under account current, term deposits and
margin accounts which allows money to be deposited and withdrawn by the account holder.
These transactions are recorded on the bank’s books, and the resulting balance is recorded
as a liability for the Bank and represents the amount owed by the Bank to the customer.

Debt securities issued

It includes debentures, bonds or other debt securities issued by the Bank. Deposits, debt
securities issued, and subordinated liabilities are initially measured at fair value minus

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 incremental direct transaction costs, and subsequently measured at their amortised cost
using the effective interest method, except where the Group designates liabilities at fair value
through profit or loss. However, debentures issued by the bank are subordinate to the deposits
from customer.

Subordinated Liabilities

Subordinated liabilities are those liabilities which at the event of winding up are subordinate to
the claims of depositors, debt securities issued and other creditors. The bank does not have
any of such subordinated liabilities.

6.12 Provisions

The Bank recognizes a provision if, as a result of past event, the Bank has a present
constructive or legal obligation that can be reliability measured and it is probable that an
outflow of economic benefit will be required to settle the obligation.

A disclosure for contingent liability is made when there is a possible obligation or a present
obligation that may but probably will not require an outflow of resources. When there is a
possible obligation or a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.

A provision for onerous contract is recognized when the expected benefits to be derived by
the Bank from a contract are lower than the unavoidable cost of meeting its obligation under
the contract.

Provisions are reviewed at each reporting date and adjusted to reflect the current best
estimate. If it is no longer probable that an outflow of resources would be required to settle
the obligation, the provision is reversed. Contingent assets are not recognized in the financial
statements. However, contingent assets are assessed continually and if it is virtually certain
that an inflow of economic benefits will arise, the asset and related income are recognized in
the period in which the change occurs.

6.13 Revenue Recognition

Revenue is the gross inflow of economic benefits during the period arising from the course of
the ordinary activities of an entity when those inflows result in increases in equity, other than
increases relating to contributions from equity participants. 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 Bank’s revenue comprises of interest income, fees and commission, foreign
exchange income, cards income, remittance income, bancassurance commission, etc. and
the bases of incomes recognition are as follows:

Interest Income

Interest income on available-for-sale assets and financial assets held at amortized cost shall
be recognized using the bank’s normal interest rate which is very close to effective interest
rate using effective interest rate method.

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 For income from loans and advances to customers, initial charges are not amortized over the life of
the loan and advances as the income so recognized closely approximates the income that would
have been derived under effective interest rate method. The difference is not considered material.
The Bank considers that the cost of exact calculation of effective interest rate method exceeds the
benefit that would be derived from such compliance.

The effective interest method is a method of calculating the amortized cost of a financial asset or a
financial liability and of allocating the interest income or interest expense over the relevant period.
The effective interest rate is the rate that discounts estimated future cash payments or receipts
through the expected life of the financial instrument or, when appropriate, a shorter period, to the
net carrying amount of the financial asset or financial liability. When calculating the effective interest
rate, the Bank estimates cash flows considering all contractual terms of the financial instrument
(for example, prepayment options) but does not consider future credit losses. As per the carve-
out Notice issued by ICAN, the calculation includes all fees paid or received between parties to
the contract that are an integral part of the effective interest rate, transaction costs and all other
premiums or discounts unless it is immaterial or impracticable to determine reliably, between parties
to the contract that are an integral part of the effective interest rate, transaction costs and all other
premiums or discounts.

Gains and losses arising from changes in the fair value of financial instruments held at fair value
through profit or loss are included in the statement of profit or loss in the period in which they arise.
Contractual interest income and expense on financial instruments held at fair value through profit or
loss is recognized within net interest income.

Fees & Commission

Fees and commissions are recognized on an accrual basis when the service has been provided or
significant act performed whenever the benefit exceeds cost in determining such value. Whenever,
the cost of recognizing fees and commissions on an accrual basis exceeds the benefit in determining
such value, the fees and commissions are charged off during the year.

Dividend Income

Dividend income are recognized when right to receive such dividend is established. Usually this
is the ex-dividend date for equity securities. Dividends 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 investment.

Net Trading Income

Net trading income comprises gains less losses related to trading assets and liabilities, and includes
all realized and unrealized fair value changes, interest, dividends and foreign exchange differences.

Net Income from other financial instrument at fair value through profit and loss statement

Net income from other financial instruments at fair value through profit or loss relates to non-
trading derivatives held for risk management purposes that do not form part of qualifying hedge
relationships and financial assets and liabilities designated at fair value through profit or loss. It
includes all realized and unrealized fair value changes, interest, dividends and foreign exchange

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 differences.

6.14 Interest Expenses

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.

6.15 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 under bonus required by the Bonus Act, 2030 to pay the amount as a
result of past service provided by the employee and the obligation can be estimated reliably
under short term employee benefits.

Short-term employee benefits include all the following items (if payable within 12 months after
the end of the reporting period):

• wages, salaries and social security contributions,

• paid annual leave and paid sick leave,
• profit-sharing and bonuses and
• non-monetary benefits

b) Post-Employment Benefits

Post-employment benefit plan includes the followings;

Defined Contribution Plan

A defined contribution plan is a post-employment benefit plan under which the Bank pays
fixed contributions into a separate entity and has no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined contribution plans are recognized as
personnel expenses in profit or loss in the periods during which related services are rendered.
Contributions to a defined contribution plan that are due more than 12 months after the end of
the reporting period in which the employees render the service are discounted to their present
value.

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 of 10% of the basic salary. The Bank does not assume any future liability for
provident fund benefits other than its annual contribution.

Defined Benefit Plan

A defined benefit plan is a post-employment benefit plan other than a defined contribution
plan. The Bank’s net obligation in respect of defined benefit plans is calculated separately for

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 each plan by estimating the amount of future benefit that employees have earned in return
for their service in the current and prior periods. That benefit is discounted to determine its
present value. Any unrecognized past service costs and the fair value of any plan assets are
deducted. The Bank recognizes all actuarial gains and losses net of deferred tax arising from
defined benefit plans immediately in other comprehensive income and all expenses related to
defined benefit plans in employee benefit expense in profit or loss. The Bank recognizes gains
and losses on the curtailment or settlement of a defined benefit plan when the curtailment
or settlement occurs. The gain or loss on curtailment or settlement comprises any resulting
change in the fair value of plan assets, any change in the present value of the defined benefit
obligation, any related actuarial gains and losses and any past service cost that had not
previously been recognized.

Termination Benefits

Termination benefits are recognized as an expense when the Bank is demonstrably committed,
without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment
before the normal retirement date, or to provide termination benefits as a result of an offer
made to encourage voluntary redundancy. Termination benefits for voluntary redundancies
are recognized as an expense if the Bank has made an offer of voluntary redundancy, it is
probable that the offer will be accepted, and the number of acceptances can be estimated
reliably. If benefits are payable more than 12 months after the reporting date, then they are
discounted to their present value.

6.16 Foreign Currency Translation

The financial statements are presented in Nepalese Rupees (NPR). Transactions in foreign
currencies are initially recorded at the functional currency rate of exchange ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign

currencies are retranslated at the functional currency rate of exchange at the statement of
financial position date.

Foreign exchange gains and losses resulting from the settlement of such transactions, and
from the translation at year-end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognized in the statement of profit or loss.

Non-monetary assets and liabilities are translated at historical exchange rates if held at historical
cost, or year-end exchange rates if held at fair value, and the resulting foreign exchange gains
and losses are recognized in either the statement of profit or loss or shareholders’ equity
depending on the treatment of the gain or loss on the asset or liability.

6.17 Financial guarantee and loan commitment

Financial guarantees are contracts that require the Bank to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment
when due in accordance with the terms of a debt instrument. Loan commitments are firm
commitments to provide credit under pre-specified terms and conditions.

Loan commitment is the commitment where the Bank has confirmed its intention to provide

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 funds to a customer or on behalf of a customer in the form of loans, overdrafts, future guarantees,
whether cancellable or not, or letters of credit and the Bank has not made payments at the
reporting date, those instruments are included in these financial statements as commitments.

6.18 Share Capital and Reserves

The Bank classifies capital instruments as financial liabilities or equity instruments in

accordance with the substance of the contractual terms of the instruments. Equity is

defined as residual interest in total assets of the Bank 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.

Dividends on ordinary shares and preference shares classified as equity are recognized in
equity in the period in which they are declared.

Incremental costs directly attributable to the issue of an equity instrument are deducted
from the initial measurement of the equity instruments considering the tax benefits achieved
thereon.

The reserves include retained earnings and other statutory reserves such as general reserve,
bond redemption reserve, foreign exchange equalization reserve, regulatory reserve,
investment adjustment reserve, staff training and development fund, CSR reserve etc.

6.19 Earnings per share including diluted

The Bank presents basic and diluted earnings per share (EPS) data for its ordinary shares.
The basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders
of the Bank by the weighted average number of ordinary shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for the effects of all dilutive
potential ordinary shares.

6.20 Segment Reporting

The Bank is organized for management and reporting purposes into segments such as Retail
Banking, Corporate Banking, SME Banking, Deprived Sector Banking, Treasury, Transaction
Banking and Other Banking. The segment results that are reported include items directly
attributable to a segment as well as those that can be allocated on a reasonable basis.
Unallocated items comprise mainly common assets, head office expenses, and tax assets
and liabilities.

7. Segmental Information

A. Information about reportable segments (NPR in milion)

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 Corporate Retail

Particulars Current Quarter Corresponding Current Quarter Corresponding Current Quarter Corresponding Current Quarter Corresponding
Previous Year Previous Year Previous Year Previous Year
Quarter Quarter Quarter Quarter
Revenue from 2,299 967 7,325 2,503 5,067 2,056 1,491 621
external customers
Intersegment (10) (13) 5 7 4 5 1 1
revenues
Segment Profit 298 306 1,256 1,178 863 959 230 282
(Loss) before tax
Segment assets 18,400 18,032 74,615 73,123 71,801 70,366 19,174 18,791

Segment liabilities 19,084 18,702 75,344 73,838 74,517 73,027 12,758 12,503

Treasury Transactional Banking Others Total

Particulars Current Quarter Corresponding Current Quarter Corresponding Current Quarter Corresponding Current Quarter Corresponding
Previous Year Previous Year Previous Year Previous Year
Quarter Quarter Quarter Quarter
Revenue from 1,240 756 228 244 203 194 17,853 7,342
external customers
Intersegment - 462 - - - - 0 462
revenues
Segment Profit 678 258 128 185 126 84 3,578 3,252
(Loss) before tax
Segment assets 48,737 47,763 106 104 9 9 232,842 228,188

Segment liabilities 51,094 50,073 45 45 0 0 232,842 228,188

B. Reconciliation of reportable segments profit or loss (NPR in million)

Particulars Current Quarter Corresponding Previous Year

Quarter
Total Profit before tax for reportable 3,578.11 3,356
segments
Profit before tax for other segments - -
Elimination of inter segment profits - 104
Elimination of discontinued opera- - -
tion
Unallocated amounts - -
-Other corporate expenses - -
Profit before tax 3,578.11 3,252

8. Related Party Disclosures

I. Subsidiary Companies

Name Shareholding %

NIC ASIA Capital Limited 100
NIC ASIA Laghubitta Bittiya Sanstha Limited 100
NIC ASIA Securities Limited 100

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg
 II. Investment in Right issue of NIC ASIA Laghubitta Sanstha Limited

The Bank has made strategic investment to broaden the scope of service and source of
income by further investing in share capital of NIC ASIA Laghubitta Bittiya Sanstha Limited
which is wholly owned subsidiary company of the Bank amounting Rs 1,004,500,000 /-.

III. Other Details

NPR in million
S Particulars NIC Asia Capital NIC Asia Laghubitta NIC Asia Securities
No
1 Share Registrar fee paid 0.825
2 Deposit received from 117.9 60
subsidiary
3 Borrowings 2,500
4 Interest paid to 22.73
subsidiaries
5 Interest received from 138.29
subsidiaries
6 Payment to subsidiaries 0.45

9. Dividends paid (aggregate or per share) separately for ordinary shares and other shares

Since the end of the previous financial year, the Bank has paid NPR 976,358,956 as cash dividend
and NPR 883,422,869 as stock divided for ordinary shares till the reporting period.

10. lssues, repurchases and repayments of debt and equity securities

I. The Bank has not issued debt securities during the reporting period

II. The Bank has issued bonus shares amounting NPR 883,422,869 during the reporting period.

11. Events after interim period

There were no material events subsequent to the date of the condensed statement of financial
position that require disclosure or adjustments to the unaudited interim financial statements.

12. Effect of changes. in the composition of the entity during the interim period merger including
and acquisition

There were no changes in the composition of the Bank for the reporting period ended 31st Asadh,
2076.

a}+s klg ;fyL klg

/fd|f] klg xfd|f] klg