NRB engages KPMG for critical audit of major banks’ loan portfolios amid IMF requirements

KATHMANDU: The Nepal Rastra Bank (NRB) has appointed KPMG Assurance and Consulting Pvt. Ltd., an Indian company, as the independent auditor to review the loan portfolios of Nepal’s 10 largest commercial banks. This move aligns with the International Monetary Fund’s (IMF) requirement under the Extended Credit Facility (ECF) that demands an international independent audit of the loan portfolios of major commercial banks in Nepal.

The IMF’s recommendation came after its third evaluation of Nepal’s economic performance under the ECF program. Following this, NRB initiated the process, issuing a notice on March 21 to invite proposals from qualified international auditing firms.

Out of several applicants, five firms were shortlisted, including Deloitte Financial Advisory from the Netherlands, JV CSC and Company, JV SRBA and BK Agarwal Chartered Accountants, KPMG Assurance and Consulting Services from India, and KPMG Taseer Hadi and Company from Pakistan. Among these, NRB selected KPMG Assurance and Consulting Services to carry out the loan portfolio review.

KPMG Assurance and Consulting Services will conduct a comprehensive audit, focusing on evaluating, monitoring, and controlling the credit risk associated with the loans provided by the selected banks. The audit will also include a thorough examination of the credit risk management systems employed by these banks.

The review will cover both qualitative and quantitative aspects of the banks’ loan portfolios. The qualitative audit will scrutinize the banks’ credit policies, guidelines, product papers, credit risk management frameworks, roles, structures, risk management practices, and implementation systems. It will also assess the management of non-performing loans, asset valuation, loan utilization, and monitoring systems.

Moreover, the NRB emphasized that the qualitative audit will also evaluate loan classification, risk weighting, adherence to local regulations, compliance with the NRB’s directives, loan disbursement practices, and loan loss provisioning for the loans issued by the 10 largest commercial banks in Nepal.

This step is seen as crucial for enhancing the financial stability and resilience of Nepal’s banking sector, ensuring that the credit risks are well-managed in line with international standards. The involvement of a reputable international auditor like KPMG is expected to boost confidence in Nepal’s banking system, which is essential for attracting foreign investment and promoting economic growth.