RASTRIYA BANIJYA BANK LIMITED

INTERIM FINANCIAL STATEMENTS

SECOND QUARTER
OF
FINANCIAL YEAR 2079/80

1|Page Interim Financial Statements of Second Quarter of FY 2079/80

 Condensed Consolidated Statement of Financial Position
As on Quarter Ended on 30 Poush 2079 (14 January 2023)
Group Bank
Particulars Immediate Previous Immediate Previous
This Quarter Ending This Quarter Ending
Year Ending (Audited) Year Ending (Audited)
Assets
Cash and cash equivalent 8,060,519,283 7,892,303,947 8,045,679,952 7,880,097,707
Due from Nepal Rastra Bank 12,135,262,069 16,423,317,544 12,135,262,069 16,423,317,544
Placement with Bank and Financial Institutions - - - -
Derivative financial instruments - - - -
Other trading assets 40,343,262 38,657,684 - -
Loan and advances to B/FIs 15,723,702,920 16,533,783,954 15,723,702,920 16,533,783,954
Loans and advances to customers 218,069,002,388 210,183,764,026 218,069,002,388 210,183,764,026
Investment securities 58,841,225,644 65,571,036,406 58,647,305,644 65,377,116,406
Current tax assets 3,736,086,823 3,637,462,515 3,736,594,768 3,636,497,060
Investment in subsidiaries - - 200,000,000 200,000,000
Investment in associates 243,942,610 243,942,610 206,111,100 206,111,100
Investment property 185,205,339 177,265,441 185,205,339 177,265,441
Property Plant and equipment 3,033,660,818 3,171,040,617 3,030,476,748 3,167,479,565
Goodwill and Intangible assets 56,855,615 53,770,535 55,629,702 52,408,411
Deferred tax assets 4,481,528 4,481,528 - -
Other assets 8,589,164,852 6,415,287,086 8,598,344,751 6,404,963,109
Total Assets 328,719,453,150 330,346,113,895 328,633,315,381 330,242,804,324
Liabilities
Due to Bank and Financial Institutions 999,801,370 4,748,840,822 999,801,370 4,748,840,822
Due to Nepal Rastra Bank 1,003,726,027 24,060,736,189 1,003,726,027 24,060,736,189
Derivative financial instruments - - - -
Deposits from customers 282,113,007,391 258,115,093,623 282,119,052,271 258,144,297,064
Borrowing 59,999,932 60,000,000 59,999,932 60,000,000
Current Tax Liabilities - - - -
Provisions 415,139,951 375,716,839 415,139,951 375,716,839
Deferred tax liabilities 320,002,617 320,002,617 320,002,617 320,002,617
Other liabilities 6,797,344,958 7,318,635,102 6,763,789,585 7,247,149,648
Debt securities issued 2,606,541,095 2,607,123,287 2,606,541,095 2,607,123,287
Subordinated Liabilities - - - -
Total liabilities 294,315,563,341 297,606,148,479 294,288,052,848 297,563,866,466
Equity
Share capital 15,637,377,054 14,940,359,099 15,637,377,054 14,940,359,099
Share premium - - - -
Retained earnings 1,893,344,861 1,919,406,055 1,878,998,587 1,863,442,017
Reserves 16,873,167,895 15,880,200,262 16,828,886,892 15,875,136,742
Total equity attributable to equity holders 34,403,889,809 32,739,965,416 34,345,262,533 32,678,937,858
Non-controlling interest - - - -
Total equity 34,403,889,809 32,739,965,416 34,345,262,533 32,678,937,858
Total liabilities and equity 328,719,453,150 330,346,113,895 328,633,315,381 330,242,804,324
Contingent liabilities and commitment 64,472,778,278 64,670,749,399 64,472,778,278 64,670,749,399
Net assets value per share 228.21 227.68 227.81 227.25

2|Page Interim Financial Statements of Second Quarter of FY 2079/80

 Condensed Consolidated Statement of Profit or Loss
For the Quarter ended on 30 Poush 2079 (14 January 2023)
Group Bank

Current Year Previous Year Corresponding Current Year Previous Year Corresponding
Particulars

Upto this Quarter Upto this Upto this Upto this

This Quarter (YTD) This Quarter Quarter(YTD) This Quarter Quarter(YTD) This Quarter Quarter(YTD)

Interest income 7,454,979,228 14,806,484,188 4,574,957,689 9,123,350,671 7,451,703,648 14,797,377,690 4,565,329,405 9,113,586,213
Interest expense 4,629,080,844 8,790,855,125 2,392,871,867 4,590,360,893 4,629,080,844 8,790,855,125 2,389,610,143 4,590,360,893
Net interest income 2,825,898,384 6,015,629,063 2,182,085,822 4,532,989,778 2,822,622,804 6,006,522,565 2,175,719,262 4,523,225,320
Fees and commission income 264,199,910 502,815,885 223,747,094 550,949,433 250,894,250 479,998,278 213,255,416 526,592,728
Fees and commission expense 89,435,044 171,153,883 68,545,414 165,772,287 89,512,544 171,231,383 64,425,736 161,674,754
Net fee and commission income 174,764,866 331,662,002 155,201,680 385,177,146 161,381,706 308,766,895 148,829,680 364,917,974
Net interest, fee and commission income 3,000,663,250 6,347,291,065 2,337,287,502 4,918,166,924 2,984,004,510 6,315,289,460 2,324,548,942 4,888,143,294
Net trading income 197,804,964 198,721,583 20,246,050 35,249,435 197,804,964 198,721,583 20,246,050 35,249,435
Other operating income 258,393,918 376,490,901 111,773,747 233,347,145 259,310,191 377,767,174 131,136,747 253,073,145
Total operating income 3,456,862,132 6,922,503,549 2,469,307,299 5,186,763,504 3,441,119,665 6,891,778,217 2,475,931,739 5,176,465,874
Impairment charge/(reversal) for loans and other losses (22,236,963) 298,463,544 66,523,701 367,921,477 (22,236,963) 298,463,544 66,523,701 367,921,477
Net operating income 3,479,099,095 6,624,040,005 2,402,783,598 4,818,842,027 3,463,356,628 6,593,314,673 2,409,408,038 4,808,544,397
Operating expense
Personnel expenses 948,579,305 1,924,000,590 844,592,922 1,620,398,845 948,564,504 1,920,094,878 841,518,227 1,613,378,897
Other operating expense 222,645,199 539,823,188 305,147,676 592,584,524 217,210,377 530,762,305 306,617,153 588,996,473
Depreciation & Amortization 236,626,979 303,450,725 58,639,903 119,276,062 236,355,924 302,913,783 59,296,777 118,593,553
Operating Profit 2,071,247,612 3,856,765,502 1,194,403,097 2,486,582,596 2,061,225,823 3,839,543,707 1,201,975,881 2,487,575,474
Non operating income 32,175,482 34,826,476 39,297,285 254,575,549 32,175,482 34,826,476 39,297,285 254,575,549
Non operating expense - - - - - - - -
Share of profit of associates - - - - - - - -
Profit before income tax 2,103,423,094 3,891,591,978 1,233,700,382 2,741,158,145 2,093,401,305 3,874,370,183 1,241,273,166 2,742,151,023
Income tax expense 630,495,918 1,167,140,655 375,486,700 828,433,179 628,227,915 1,162,518,577 372,381,950 822,645,307
Current Tax 630,495,918 1,167,140,655 375,486,700 828,433,179 628,227,915 1,162,518,577 372,381,950 822,645,307
Deferred Tax - - - - - - - -
Profit for the period 1,472,927,176 2,724,451,323 858,213,682 1,912,724,966 1,465,173,390 2,711,851,606 868,891,216 1,919,505,716

3|Page Interim Financial Statements of Second Quarter of FY 2079/80

 Consolidated Statement of Other Comprehensive Income
For the year ended 30 Poush 2079 (14th January 2023)

Group Bank
Particulars Year ended Year ended Year ended Year ended
30 Poush 2079 32 Ashadh 2079 30 Poush 2079 32 Ashadh 2079
Profit for the year 2,724,451,323 4,285,766,568 2,711,851,606 4,292,821,850
Other comprehensive income, net of income tax
a) Items that will not be reclassified to profit or loss
- Gains/(losses) from investments in equity instruments measured at fair value - 3,196,401,428 3,196,401,428
- Gains/(losses) on revaluation -
- Actuarial gains/(losses) on defined benefit plans - (1,130,324,437) (1,130,324,437)
- Income tax relating to above items - (619,823,097) (619,823,097)
Net Other Comprehensive Income that will not be reclassified to profit or loss - 1,446,253,894 - 1,446,253,894
b) Items 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)
- Income tax relating to above items - - - -
- Reclassify to profit or loss - - - -
Net Other Comprehensive 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 - 1,446,253,894 - 1,446,253,894
Total comprehensive income for the period 2,724,451,324 5,732,020,462 2,711,851,606 5,739,075,744
Total comprehensive income attributable to:
Equity holders of the Bank 2,724,451,324 5,732,020,462 2,711,851,606 5,739,075,744
Non-controlling interest
Total comprehensive income for the period 2,724,451,324 5,732,020,462 2,711,851,606 5,739,075,744

4|Page Interim Financial Statements of Second Quarter of FY 2079/80

 Significant Ratios as per NRB Directive
Group Bank
Current Year Previous Year Corresponding Current Year Previous Year Corresponding
Particulars
Upto this Upto this Upto this Upto this
This Quarter This Quarter This Quarter This Quarter
quarter(YTD) quarter(YTD) quarter(YTD) quarter(YTD)
Capital Fund to RWA 13.20% 13.72% 13.20% 13.72%
Non-performing loan(NPL) to total loan 2.79% 3.06% 2.79% 3.06%
Total loan loss provision to Total NPL 122.35% 117.64% 122.35% 117.64%
Cost of Funds 7.43% 4.43% 7.43% 4.43%
Credit to Deposit Ratio (Calculated as per NRB Directives) 81.65% 83.51% 81.65% 83.51%
Base Rate (Poush) 9.73% 6.60% 9.73% 6.60%
Base Rate (Quarterly Average) 9.29% 6.14% 9.29% 6.14%
Interest Rate Spread 4.06% 3.61% 4.06% 3.61%

5|Page Interim Financial Statements of Second Quarter of FY 2079/80

 Statement of Changes in Equity
For the year ended 30 Poush 2079 (14th January 2023)
Group
Attributable to equity holders of the Bank
Share Exchange Regulatory Capital Fair Value Revaluation Retained Non-controlling
Particulars Share Capital General Reserve Other Reserve Total Total Equity
Premium Equalisation Reserve Reserve Reserve Reserve Earning Interest
Balance as at Shrawan 1, 2079 14,940,359,099 - 10,602,050,559 102,331,730 10,900,423,259 481,195,653 2,617,369,608 77,183,784 1,919,406,055 (8,900,354,330) 32,739,965,418 - 32,739,965,419
Adjustment/Restatement (1,000,000,000) - - - - - (1,000,000,000) - (1,000,000,000)
Adjusted Restated Balance at Shrawan 1, 2079 13,940,359,099 - 10,602,050,559 102,331,730 10,900,423,259 481,195,653 2,617,369,608 77,183,784 1,919,406,055 (8,900,354,330) 31,739,965,418 - 31,739,965,419
Comprehensive Income for the year -
Profit for the year - - - - - - - - 2,724,451,323 - 2,724,451,323 - 2,724,451,323
Other Comprehensive income, net of tax - - - - - - - - - - - - -
- Gains/(losses) from investments in equity
- - - - - - - - - - - - -
instruments measured at fair value
- Gains/(losses) on revaluation - - - - - - - - - - - - -
- Actuarial Gains/(losses) on defined benefit plans - - - - - - - - - - - - -
- Gains/(losses) on cash flow hedge - - - - - - - - - - - - -
- Exchange gains/(losses) arising from translating
- - - - - - - - - - - - -
financial assets of foreign operation
- - - - - - - - - -
Total comprehensive income for the year - - - - - - - - - - - - -
Transfer to reserve during the year - - 542,360,396 - 43,146,154 - - - (953,750,149) 368,243,599 - - -
Transfer from the reserve during the year - - - - - - - - - - - - -
- - - - - - - - - - -
Transactions with owners, directly recognized in
- - - - - - - - - - -
equity
Calls in Advance 1,000,000,000 1,000,000,000 1,000,000,000
Right share issued - - - - - - - - - - - - -
Share based payments - - - - - - - - - - - - -
Dividends to equity holders: - - - - - - - - - - - -
Bonus Shares issued 697,017,955 - - - - - - - (697,017,955) - - - -
Cash Dividend Paid - - - - - - - - (1,045,526,932) - (1,045,526,932) - (1,045,526,932)
Total contributions by and distributions: - - - - - - - - - - - -
Balance as at Poush End, 2079 15,637,377,054 - 11,144,410,954 102,331,730 10,943,569,413 481,195,653 2,617,369,608 77,183,784 1,947,562,342 (8,532,110,731) 34,418,889,810 - 34,418,889,812

6|Page Interim Financial Statements of Second Quarter of FY 2079/80

 Statement of Changes in Equity
For the year ended 30 Poush 2079 (14th January 2023)
Bank
Attributable to equity holders of the Bank

Share Exchange Regulatory Capital Fair Value Revaluation Retained Non-controlling

Particulars Share Capital General Reserve Other Reserve Total Total Equity
Premium Equalisation Reserve Reserve Reserve Reserve Earning Interest

Balance as at Shrawan 1, 2079 14,940,359,099 - 10,598,497,485 102,331,730 10,900,423,259 481,195,653 2,617,369,608 77,183,784 1,863,442,017 (8,901,864,780) 32,678,937,854 - 32,678,937,854
Adjustment/Restatement (1,000,000,000) - - - - - - - - (1,000,000,000) - (1,000,000,000)
Adjusted Restated Balance at Shrawan 1, 2079 13,940,359,099 - 10,598,497,485 102,331,730 10,900,423,259 481,195,653 2,617,369,608 77,183,784 1,863,442,017 (8,901,864,780) 31,678,937,854 - 31,678,937,854
Comprehensive Income for the year - - -
Profit for the year - - - - - - - - 2,711,851,606 - 2,711,851,606 - 2,711,851,606
Other Comprehensive income, net of tax - - -
- Gains/(losses) from investments in equity instruments
- - - - - - - - - - - -
measured at fair value
- Gains/(losses) on revaluation - - - - - - - - - - - -
- Actuarial Gains/(losses) on defined benefit plans - - - - - - - - - - - - -
- Gains/(losses) on cash flow hedge - - - - - - - - - - - -
- Exchange gains/(losses) arising from translating financial
- - - - - - - - - - - -
assets of foreign operation
- -
Total comprehensive income for the year - - - - - - - - - - -
Transfer to reserve during the year - - 542,360,396 - 43,146,154 - - (953,750,149) 368,243,599 - - -
Transfer from the reserve during the year - - - - - - - - - - - - -

Transactions with owners, directly recognized in equity - -

Calls in Advance 1,000,000,000 1,000,000,000 1,000,000,000
Right share issued - - - - - - - - - - - -
Share based payments - - - - - - - - - - - - -
Dividends to equity holders: - - - - - - - - - - - -
Bonus Shares issued 697,017,955 - - - - - - - (697,017,955) - - - -
Cash Dividend Paid - - - - - - - - (1,045,526,932) - (1,045,526,932) - (1,045,526,932)
Total contributions by and distributions: - - -
Balance as at Poush End, 2079 15,637,377,054 - 11,140,857,881 102,331,730 10,943,569,413 481,195,653 2,617,369,608 77,183,784 1,878,998,587 (8,533,621,181) 34,345,262,528 - 34,345,262,528

7|Page Interim Financial Statements of Second Quarter of FY 2079/80

 Consolidated Statement of Cash Flows
For the year ended 30 Poush 2079 (14th January 2023)

Group Bank
Particulars Year ended Year ended Year ended Year ended
30 Poush 2079 32 Ashadh 2079 30 Poush 2079 32 Ashadh 2079

CASH FLOWS FROM OPERATING ACTIVITIES

Interest received 11,593,536,522 18,231,007,337 11,603,656,782 18,231,007,337
Fees and other income received 502,893,385 1,050,279,317 479,998,278 1,019,601,336
Dividend received - - - -
Receipts from other operating activities 571,563,247 1,058,930,707 554,266,220 1,060,694,469
Interest paid (8,681,296,221) (11,176,875,356) (8,681,296,221) (11,177,108,616)
Commission and fees paid (171,231,383) (349,244,611) (171,231,383) (349,342,968)
Cash payment to employees (2,858,141,183) (4,256,046,447) (2,854,235,471) (4,241,876,476)
Other expense paid (539,833,191) (1,190,729,033) (530,762,305) (1,175,874,498)
Operating cash flows before changes in operating assets and liabilities 417,491,176 3,367,321,915 400,395,900 3,367,100,585

(Increase)/Decrease in Operating Assets (4,111,920,726) (32,625,159,391) (4,130,475,316) (32,601,999,144)

Due from Nepal Rastra Bank 4,288,055,475 3,705,182,062 4,288,055,475 3,705,182,062
Placement with bank and financial institutions - - - -
Other trading assets (1,685,578) (17,702,839) - -
Loan and advances to bank and financial institutions 810,801,438 (1,112,284,801) 810,801,438 (1,112,284,802)
Loans and advances to customers (7,027,274,397) (32,720,032,714) (7,028,010,689) (32,720,032,713)
Other assets (2,181,817,664) (2,480,321,098) (2,201,321,540) (2,474,863,691)

Increase/(Decrease) in operating liabilities (2,289,722,248) 16,314,593,946 (2,274,950,728) 16,282,137,198

Due to bank and financial institutions (3,749,039,452) 2,379,600,822 (3,749,039,452) 2,379,600,822
Due to Nepal Rastra Bank (23,057,010,162) 20,266,659,099 (23,057,010,162) 20,266,659,099
Deposit from customers 23,997,913,768 (5,697,258,111) 23,974,755,207 (5,692,468,783)
Borrowings - - - -
Other liabilities 518,413,598 (634,407,864) 556,343,679 (671,653,940)
Net cash flow from operating activities before tax paid (5,984,151,798) (12,943,243,529) (6,005,030,144) (12,952,761,362)
Income taxes paid (1,265,764,963) (1,805,011,728) (1,262,616,285) (1,794,015,742)
Net cash flow from operating activities (7,249,916,761) (14,748,255,256) (7,267,646,429) (14,746,777,104)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investment securities - - - -
Receipts from sale of investment securities 6,185,018,416 4,248,223,770 6,185,018,416 4,270,143,771
Purchase of property and equipment (156,766,673) (1,863,953,718) (156,742,924) (1,863,379,369)
Receipt from the sale of property and equipment - 169,680,518 - 169,680,518
Purchase of intangible assets (12,949,423) (13,902,478) (12,676,838) (13,450,477)
Receipt from the sale of intangible assets - - - -
Purchase of investment properties - - - -
Receipt from the sale of investment properties - - - -
Interest received 2,534,906,571 2,529,174,628 2,515,679,813 2,509,974,870
Dividend received 38,309,518 202,304,895 57,309,518 221,304,895
Net cash used in investing activities 8,588,518,409 5,271,527,616 8,588,587,986 5,294,274,207

CASH FLOWS FROM FINANCING ACTIVITIES

Receipt from issue of debt securities - - - -
Repayment of debt securities - - - -
Receipt from issue of subordinated liabilities - - - -
Repayment of subordinated liabilities - - - -
Receipt from issue of shares - 2,000,000,000 - 2,000,000,000
Dividends paid (1,060,245,149) (276,504,980) (1,045,245,149) (275,504,980)
Interest paid (110,141,096) (127,024,656) (110,141,096) (127,024,651)
Other receipt/payment (68) - (68) -
Net cash from financing activities (1,170,386,313) 1,596,470,364 (1,155,386,313) 1,597,470,369

Net increase (decrease) in cash and cash equivalents 168,215,335 (7,880,257,276) 165,555,244 (7,855,032,528)
Cash and cash equivalents at Shrawan 1, 2079 7,892,303,948 15,772,561,224 7,880,124,708 15,735,157,236
Cash and cash equivalent acquired from merger - - - -

Effect of exchange rate fluctuations on cash and cash equivalents held - - - -

Cash and cash equivalents at Poush end 2079 8,060,519,283 7,892,303,948 8,045,679,952 7,880,124,708

8|Page Interim Financial Statements of Second Quarter of FY 2079/80

 Statement of Distributable Profit or Loss
For the Quarter ended on 30 Poush 2079 (14 January 2023)
Particulars Amount (Rs.)
Opening Retained Earnings 120,897,130
Net profit or (loss) upto Second quarter of F/Y 2079/80 2,711,851,606
1. Appropriations:
1.1 Profit required to be appropriated to statutory reserve 910,613,920
a. General reserve 542,370,321
b. Capital redemption reserve
c. Foreign exchange fluctuation fund -
d. Corporate social responsibility fund 23,701,312
e. Employees' training fund 32,042,287
f. Other
Debenture Redemption Reserve 312,500,000
1.2 Profit required to be transferred to Regulatory Reserve 43,146,154
a.Transferred to Regulatory Reserve 43,146,154
b.Transferred from Regulatory reserve -
Distributable Profit or (Loss) 1,878,988,661

9|Page Interim Financial Statements of Second Quarter of FY 2079/80

 Notes to Interim Financial Statements
Second Quarter of FY 2079/80

1. Basis of preparation
The interim financial statements of the Bank have been prepared in accordance with the
Nepal Financial Reporting Standards(NFRS) adopted by Accounting Standard Board of
Nepal read along with the approved carve-outs.
2. Statement of Compliance
The financial statements have been prepared in the format as prescribed by Directive No. 4
of NRB Directives, 2078. Historical cost convention was used for financial statement
recognition and measurement except otherwise required by NFRS. Where, other method(s),
other than historical costs, such as fair value has been applied, these have been disclosed in
accordance with the applicable reporting framework.
The amounts of financial statements are presented in Nepalese Rupees (NPR) being the
functional currency of the Bank. The figures were rounded to the nearest rupee except
where indicated otherwise.
The financial statements comprise the Statement of Financial Position, Statement of Profit
or Loss, Statement of Other Comprehensive Income, the Statement of Changes in Equity,
the Statement of Cash Flows and the Notes to the Accounts.
3. Use of Estimates, assumptions and judgments
The Bank, under NFRS, is required to apply accounting policies to most appropriately suit
its circumstances and operating environment. Further, the Bank is required to make
judgments in respect of items where the choice of specific policy, accounting estimate or
assumption to be followed could materially affect the financial statements. This may later
be determined that a different choice could have been more appropriate. It is also required
to make estimates and assumptions that will affect the assets, liabilities, disclosure of
contingent assets and liabilities, and profit or loss as reported in the financial statements.
The Bank applies estimates in preparing and presenting the financial statements and such
estimates and underlying assumptions are reviewed periodically. The revision to
accounting estimates are recognized in the period in which the estimates are revised, and
are applied prospectively.
The accounting policies as explained in Section 5 herein were consistently applied to all
the years presented except otherwise stated. They were further included in the relevant
notes for each item of the financial statements, and the effect and nature of the changes, if
any, were disclosed. The accounting estimates were appropriately disclosed in the relevant
sections of the Notes wherever the estimates have been applied along with the nature and
effect of changes of accounting estimates, if any.
The accounting policies are to be applied consistently. Changes in accounting policies, if
any, are to be disclosed with the financial impact to the extent possible. When policies are
not guided by the reporting framework, NFRS, other reporting standards and generally
accepted accounting principles are to be followed.

10 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 4. Changes in Accounting policies
There are no any significant changes in accounting policies during the period.
5. Significant Accounting Policies

5.1 Basis of Measurement

The financial statements are prepared on a historical cost basis except for the following
items which were measured or recognized as stated:
1) Financial assets and liabilities are measured at fair value at its initial recognition and
subsequently measured at fair value or amortised cost on the basis of classification of
financial asset or liability.

2) Liabilities for defined benefit obligations are recognized at the present value of the
defined benefit obligation after deducting the net of the plan assets, plus unrecognized
actuarial gains, less unrecognized past service cost and unrecognized actuarial losses.
5.2 Basis of Consolidation
a. Business Combination
Business combination are accounted using the acquisition method as prescribed under
NFRS 3- “Business Combination”.
There is no business combination up to Second Quarter of the fiscal year 2079-80.
b. Non-Controlling Interest (NCI)
For each business combination, the Bank elects to measure any non-controlling interests in
the acquiree either at fair value; or at their proportionate share of the acquiree’s identifiable
net assets, which are 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.
The Bank does not have any NCI as on reporting date.
c. 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

11 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 interest income and technical fee) are eliminated in full while preparing the consolidated
financial statements.
d. 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
e. 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
5.3 Cash and Cash equivalent
Cash and cash equivalents include notes and coins on hand and highly liquid financial
assets with original maturities of three months or less from the acquisition date 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.
5.4 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 date at which the Bank commits to purchase or sell
the asset.
b. Classification
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

12 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 contractual cash flow characteristics of the financial assets. The two classes of financial
assets are as follows;
1. Financial assets measured at amortized cost: a financial asset is measured at
amortized cost if the asset is held within a business model whose objective is to
hold assets in order to collect contractual cash flows and if 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 assets measured at fair value: a financial asset other than those measured
at amortized cost are measured at fair value. They are further classified into two
categories as below:
a. Financial assets are measured at 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 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.
b. Financial assets are measured at fair value through other comprehensive
income if the 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.
Financial Liabilities
The Bank classifies its financial liabilities, other than financial guarantees and loan
commitments, as follows:
 Financial Liabilities at Fair Value through Profit or Loss: Financial liabilities are
classified at 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
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
 Financial Liabilities measured at amortized cost: Financial liabilities other than
those measured at fair value though profit or loss are classified as subsequently
measured at amortized cost using effective interest method.
c. Measurement
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.
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

13 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 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 Profit or Loss whereas of financial assets at fair value through
other comprehensive income are recognized in other comprehensive income.
d. De-recognition
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 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.
On de-recognition 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
consideration received (including any new asset obtained less any new liability assumed)
shall be recognized in profit and loss account.
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.
De-recognition 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 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.
e. 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.

14 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 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 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 on an appropriate basis or when the instrument is redeemed,
transferred or sold, or the fair value becomes observable.
All unquoted equity instruments are recorded at average of price determined as per
Capitalized Earning Method and Net Assets Value per share. Entities of which no data is
whatsoever available, valuation has been done at cost net of impairment if any.
f. 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.

15 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

  Where there is observable data indicating that there is a measurable decrease in the
estimated future cash flows of a group of financial assets, although the decrease
cannot yet be identified with specific individual financial assets.
The Bank considers evidence of impairment for loans and advances and amortized cost
investment securities at both a specific asset and collective level. All individually
significant loans and advances and amortized cost 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 amortized cost investment securities that are not individually
significant are collectively assessed for impairment by grouping together loans and
advances and amortized cost 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 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.
Impairment losses on assets measured at amortized cost
As per NFRS 9
Financial assets carried at amortized cost (such as amounts due from Banks, loans and
advances to customers as well as held–to–maturity investments are 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 (Principal outstanding Rs 100
million or more) and borrowers classified as Non Performing as per Nepal Rastra Bank
Directives 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 based on the past experience. For
the purpose of collective assessment of impairment, the assets are categorized in to the
following nine broad products as follows:
a. Term Loan
b. Auto Loan
c. Home Loan
d. Personal Loan
e. Overdraft
f. Other Working Capital Loan
g. Gold Loan
h. Deprived & Priority Sector Loan

16 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 i. Other Loan
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 income statement. 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 non-performing 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.
Policies Adopted
As per the NFRS Carve out, the Bank measured 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 NFRS 9.
5.5 Trading Assets and Liabilities
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. They 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.
5.6 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. Hedge accounting
is not adopted for certain derivatives held for risk management such as Forward Exchange
Contracts.

5.7 Property and Equipment

a. Recognition and Measurement
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 if 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 labour;

17 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

  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; and
 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. Any revaluation reserve acquired from the merger
accounted for using pooling of interest method are shown at the carrying amount. 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 from disposal and the carrying amount of the item) is recognized within other
income in profit or loss.
b. Capital Work in Progress
Fixed assets under construction and cost of assets not ready for use are shown as capital
work in progress.
c. Depreciation
Straight line method of depreciation on fixed assets is applied to allocate their cost to
their residual values over their estimated useful life as per management judgment, as
follows:
Class of assets Revised useful life Residual Value
Computer Up to 5 Years 1%
Furniture and Fixtures Up to 5 Years 2%
Office Equipment Up to 5 years 1%
Vehicle Up to 7 Years 5%
Building Up to 50 Years 10%
Lower of 15 Years or Lease
Leasehold 0
Period
5 years or expiry period
Software 0
whichever is lower
Assets costing less than Rs 2,000 are fully charged to profit loss account in the year of
purchase.

18 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 d. De-recognition
The carrying amount of Property and Equipment is derecognized on disposal or when
no future economic benefits are expected from its use or disposal. The gain or loss
arising from the de-recognition of an item of property and equipment is included in
profit or loss when the item is derecognized (unless on a sale & lease back). The gain
shall be classified as revenue.
5.8 Intangible Assets
Acquired 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. Amortization methods, useful lives and residual values
are reviewed at each reporting date and adjusted if appropriate.
5.9 Investment Property/Non-Current Assets Held for Sale
Investment Property
Investment properties includes 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.
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 FVTOCI 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.

19 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 5.10 Income Tax
Tax expense comprises current and deferred tax. Current tax and deferred tax are
recognised in profit or loss except to the extent that they relate to items recognised 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.
5.11 Deposits, debts securities issued and subordinated liabilities
a. Deposits
The Bank accepts deposits from its customers under savings account, current account, 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.
b. Debt Securities Issued
Deposits, debt securities issued and subordinated liabilities are initially measured at fair
value minus incremental direct transaction costs, and subsequently measured at their
amortized cost using the effective interest method, except where the Group designates
liabilities at fair value through profit or loss.
c. 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.
5.12 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

20 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 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.
5.13 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:
a. Interest Income
Interest income on FVTOCI 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.
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. 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.
The Bank recognizes the interest income on loans and advances as per Guideline on
Recognition of Interest Income, 2019 issued by Nepal Rastra Bank. The guideline requires
bank to cease to accrue interest in case of loan where contractual payments of principal
and/or interest are more than 12 months in arrears, irrespective of the net realizable value
of collateral. Further, it also requires the bank to cease accrual of interest income in case of

21 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 loans where contractual payments of principal and/or interest are more than 3 months in
arrears and where the “net realizable value” of security is insufficient to cover payment of
principal and accrued interest.
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.
b. 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.
c. 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.
d. Net Trading Income
Net trading income comprises gains less losses related to trading assets and liabilities, and
includes all realised and unrealised fair value changes, interest, dividends and foreign
exchange differences.
Net Income from other financial instrument at fair value through Profit or Loss
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 realised and unrealised fair value changes, interest,
dividends and foreign exchange differences.
5.14 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.
5.15 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. The Bank provides bonus at 5% of Net Profit before
tax. The Bank is a wholly owned enterprise of Government of Nepal. The percentage of

22 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 bonus which is to be distributed by the Government owned enterprises has been determined
by the Government of Nepal at 5%.
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;
i) 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 recognised
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 permanent 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.
All permanent employees of the Bank are entitled to receive benefits under welfare
provident fund, a defined contribution plan, in which both the Bank contribute two months’
basic salary and such amount is transferred to separate retirement fund. The Bank does not
assume any future liability for provident fund benefits other than its annual contribution.
All permanent employees of the Bank are entitled to receive benefits under medical fund,
a defined contribution plan, in which both the Bank contribute certain percentage of annual
basic salary based on level of employees and such amount is transferred to separate
retirement fund. The Bank does not assume any future liability for provident fund benefits
other than its annual contribution.
ii) 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 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 unrecognised past service costs and the fair value of any
plan assets are deducted.
The Bank recognises 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.

23 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 The Bank recognises 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 recognised.
The bank has pension plan to the permanent employees hired before 2050 B.S and gratuity
plan to employees enrolled after 2050 B.S. Employees are also entitled to receive retirement
benefit on endowment life insurance scheme and leave as per human resource by-laws of
the Bank.
iii) Termination Benefits
Termination benefits are recognised 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 recognised 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.
5.16 Leases
NFRS 16 replaces NAS 17 and sets out the principles for the recognition, measurement,
presentation, and disclosure of leases. All leases result in the lessee recognizing the right
to use an asset at the commencement date of the lease, and if lease payments are made over
time, also recognizing financing. Accordingly, NFRS 16 eliminates the classification of
leases as either operating leases or finance leases as required by NAS 17 and, instead,
introduces a single lessee accounting model for lessee.
In accordance with the transitional provisions of NFRS 16, the bank has adopted the new
standard applying a modified retrospective approach:
Lease Liability at the present value of remaining lease payments, discounted using the
lessee’s incremental borrowing rate at the date of initial application and Right of use asset
equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments
relating to that lease recognized in the statement of financial position immediately before
the date of application.

5.17 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 recognised in the statement of profit or loss.

24 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 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.
5.18 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 agreement.
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 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 statement as commitments.
5.19 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 etc.
Regulatory reserve includes any amount derived as result of NFRS convergence with effect
in retained earning computed as per NRB Directive No. 4.
5.20 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.

25 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 6. Segment Reporting
The Bank’s segmental reporting is in accordance with NFRS 8 Operating Segments. Operating segments are reported in a manner consistent
with the internal reporting provided to the bank’s management committee, which is responsible for allocating resources and assessing
performance of the operating segments. Bank has no practice of accounting intra segment revenue or expenses. Income and expenses directly
associated with each segment are included in determining business segment performance

Information about Reportable Segments:

Head Office Province 1 Madhesh Province Bagmati Province Gandaki Province

Particulars Corresponding Corresponding Corresponding Corresponding Corresponding
Current Quarter Previous year Current Quarter Previous year Current Quarter Previous year Current Quarter Previous year Current Quarter Previous year
Quarter Quarter Quarter Quarter Quarter
Revenue from external customers 3,553,699,634.01 258,938,072.00 1,628,483,670.56 1,302,595,986.00 1,150,912,675.28 911,904,415.00 6,133,426,241.68 4,997,338,533 871 1,282,851,685.13 871,811,238.00
Intersegment revenues - - - - - - - - - -
Net Revenue 3,553,699,634.01 258,938,072.00 1,628,483,670.56 1,302,595,986.00 1,150,912,675.28 911,904,415.00 6,133,426,241.68 4,997,338,533 871 1,282,851,685.13 871,811,238.00
Segment profit/(loss)
Segment assets 69,615,904,369.96 71,844,467,226.00 31,956,340,548.04 28,670,190,309.00 23,470,871,781.72 20,776,516,261.00 133,401,619,182.00 117,981,318,996.00 22,202,198,406.08 19,521,331,136.00
Segment liabilities 27,843,354,623.96 34,308,253,855.00 36,799,794,250.12 34,078,842,130.00 31,076,119,857.68 30,610,157,403.00 130,814,961,640.40 106,280,915,375.00 16,033,634,293.73 13,640,275,683.00

Lumbini Province Karnali Province Sudurpashim Province Total

Corresponding Corresponding Corresponding Corresponding
Particulars
Current Quarter Previous year Current Quarter Previous year Current Quarter Previous year Current Quarter Previous year
Quarter Quarter Quarter Quarter
Revenue from external customers 1,242,761,407.50 998,210,048.00 391,794,290.38 348,019,058.00 504,761,596.45 494,259,720.00 15,888,691,201.00 10,183,077,070.00
Intersegment revenues - - - - - - - -
Net Revenue 1,242,761,407.50 998,210,048.00 391,794,290.38 348,019,058.00 504,761,596.45 494,259,720.00 15,888,691,201.00 10,183,077,070.00
Segment profit/(loss)
Segment assets 27,559,866,685.36 24,429,501,144.00 8,406,020,719.20 7,349,727,817.00 12,020,493,688.38 9,157,976,016.00 328,633,315,380.75 299,731,028,904.00
Segment liabilities 28,369,999,434.05 26,846,408,483.00 7,601,308,121.74 6,999,631,384.00 15,748,880,626.32 15,793,953,953.00 294,288,052,848.00 268,558,438,266.00

26 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

7. Related party disclosures

The Bank identifies the following as the related parties under the requirements of NAS 24.

Name Relationship Remarks

RBB Merchant Banking Company Limited Subsidiary
Defunct
Everest Foods Limited (w.e.f 1 May 2018) Subsidiary
company
Defunct
Himal Cement Company (w.e.f 1 May 2018) Associate
company
Rastra Utthan Laghubitta Bittiya Sanstha Ltd. Associate
Butwal Suti Dhago Udhyog Associate
Nepal Digital Payment Co. Ltd. Associate

a. Board Member Allowances and Facilities

The Chairperson and other members of the Board are paid NPR 4,000 per meeting respectively for
Board and Board Level Committees meeting.

In addition to the above meeting allowances, the Board Members have been provided with a monthly
allowance of NPR 2,000 for newspapers, NPR 2,500 for telephone and for those directors who are
not using transportation facility from the Bank are provided with amount equivalent to 20 liter of fuel

b. Amount paid to Chief Executive Officer

The Board of Directors has renewed appointment of Mr. Kiran Kumar Shrestha as Chief Executive
Officer of the Bank with effect from 2076/12/29 for the period of 4 years. CEO has been paid salary
and allowance of NPR 2,756,000 till second quarter of financial year 2079-80. CEO has been
reimbursed with the communication expenses and has been provided vehicle facility for official
purpose.
Basic Provident Total payment till
Name Allowance Bonus Other
Salary Fund Q1
Kiran Kumar 1,560,000 156,000 1,040,000 - - 2,756,000
Shrestha

c. Compensation Details for Key Management Personnel

Key Management Personnel includes members of Management Committee of the Bank and includes
the following members;

Name Designation
Kiran Kumar Shrestha Chief Executive Officer
Devendra Raman Khanal Deputy Chief Executive Officer
Sarswati Adhikari Deputy Chief Executive Officer
Debesh Prasad Lohani Deputy Executive Officer

27 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80

 Bimal Dangol Deputy Executive Officer
Pawan Regmi Deputy Executive Officer
Vinay Raman Paudel Deputy Executive Officer
Durga Kumari Kandel Deputy Executive Officer
Hemraj Kharel Member Secretary

d. Transaction with Subsidiaries and Associates:

All transactions between the Bank and Subsidiary are executed on arm’s length principle. Effects of
all inter-company transactions and outstanding balances are excluded in group statements.

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

The cash dividend and bonus share equivalent to 7.50%. and 5.00% of paid up share capital amounting
Rs. 1,045,526,932 and 697,017,955 respectively, was distributed from distributable profit up to FY
2078/79, during the month of Poush 2079.

9. Issues, repurchases and repayments of debt and equity securities

There is no issue, repurchases and repayments of debt and securities during the reporting period.

10. Events after reporting period.

Events after the reporting date are those events, favorable and unfavorable, that occur between the
reporting date and the date when the financial statements are authorized for issue. There are no material
events after reporting period affecting financial status of the bank as on 2079 Poush End.

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

There are no merger and acquisition affecting changes in the composition of the entity during the
interim period as on 2079 Poush End.

28 | P a g e Interim Financial Statements of Second Quarter of FY 2079/80