Nepal Investment Bank Limited

Condensed Consolidated Statement of Financial Position

As on Quarter ended 2077 Ashad 31
NPR in '000
Group Bank
lmmediate Previous lmmediate Previous
This Quarter
Assets This Quarter Ending Year Ending
Ending
Year Ending
(Audited) (Audited)

Ashadh 31 2077 Ashadh 31 2076 Ashadh 31 2077 Ashadh 31 2076

Cash and Cash Equivalent 10,310,328 14,057,181 10,013,893 13,520,574
Due from Nepal Rastra Bank 14,321,971 10,860,922 14,321,971 10,860,922
Placements with Banks and FIs 7,964,992 8,498,974 7,964,992 8,498,974
Derivative financial instruments 133,977 436,888 133,977 436,888
Other trading assets 82,187 95,681 - -
Loans and advances to B/FIs 4,920,062 4,274,416 4,920,062 4,274,416
Loans and advances to customers 135,457,513 122,866,554 135,457,513 122,866,554
Investment Securities 24,395,731 17,405,725 23,582,660 16,973,475
Current tax assets 748,928 507,636 748,912 501,180
Investments in subsidiaries - - 171,500 171,500
Investments in associates 153,229 121,632 82,363 82,364
Investment Property 265,983 214,090 265,983 214,090
Property and Equipment 4,030,160 4,068,901 4,010,755 4,042,456
Goodwill and Intangible assets 126,106 92,519 124,619 90,628
Deferred tax assets - - - -
Other assets 1,412,298 3,356,115 1,354,771 3,307,966
Total Assets 204,323,462 186,857,234 203,153,970 185,841,988

Group Bank

lmmediate Previous This Quarter lmmediate Previous

Liabilities This Quarter Ending
Year Ending Ending Year Ending

Ashadh 31 2077 Ashadh 31 2076 Ashadh 31 2077 Ashadh 31 2076

Due to Banks and Financial Institutions 2,462,217 2,790,963 2,462,217 2,790,963
Due to Nepal Rastra Bank 2,723 940,267 2,723 940,267
Derivative Financial Instruments - - - -
Deposits from customers 166,338,554 149,336,508 166,362,126 149,392,282
Borrowings - - - -
Current tax liabilities - - - -
Provisions 5,668 2,279 - -
Deferred tax liabilities 965,958 857,560 973,605 865,207
Other Liabilities 3,708,087 3,871,827 2,783,052 3,024,074
Debt securities issued 3,250,000 3,250,000 3,250,000 3,250,000
Subordinated liabilities - - - -
Total Liabilities 176,733,208 161,049,404 175,833,723 160,262,792
Equity
Share capital 14,248,955 12,869,749 14,248,955 12,869,749
Share premium 32,599 105,649 32,599 105,649
Retained earnings 1,903,345 2,303,535 1,623,100 2,064,662
Reserves 11,405,356 10,528,897 11,415,595 10,539,136
Total equity attributable to equity holders 27,590,255 25,807,830 27,320,248 25,579,196
Non-Controlling Interest - - - -
Total equity 27,590,255 25,807,830 27,320,248 25,579,196
Total Liabilities and Equity 204,323,462 186,857,234 203,153,970 185,841,988
 Nepal Investment Bank Limited
Condensed Consolidated Statement of Profit or Loss
For the Quarter ended 2077 Ashad
NPR in '000
Group Bank
Previous Year Corresponding Previous Year Corresponding
Current Year Current Year
(Audited) (Audited)
Particulars
Up to This Up to This Up to This Up to This
This Quarter This Quarter This Quarter This Quarter
Quarter (YTD) Quarter (YTD) Quarter (YTD) Quarter (YTD)

Interest income 3,657,292 15,267,342 3,593,801 15,047,527 3,632,914 15,183,854 3,575,239 14,975,215
Interest expense (2,408,582) (9,421,936) (2,307,260) (8,798,167) (2,408,669) (9,423,657) (2,313,530) (8,801,709)
Net interest income 1,248,709 5,845,406 1,286,541 6,249,360 1,224,245 5,760,197 1,261,709 6,173,506
Fees and Commission income 421,190 1,597,772 505,350 1,550,629 392,773 1,513,164 466,512 1,442,867
Fees and Commission expense (68,033) (327,589) (112,364) (355,753) (64,028) (315,998) (106,242) (339,737)
Net fee and commission income 353,157 1,270,183 392,986 1,194,876 328,745 1,197,165 360,270 1,103,130
Net interest, fee and commission income 1,601,866 7,115,589 1,679,527 7,444,236 1,552,990 6,957,362 1,621,978 7,276,637
Net trading income 189,330 879,292 296,453 895,393 182,139 871,873 281,511 890,844
Other operating income 14,763 178,824 (46,472) 141,030 18,132 230,124 2,509 180,329
Total Operating Income 1,805,960 8,173,705 1,929,507 8,480,659 1,753,261 8,059,359 1,905,999 8,347,809
Impairment (charges)/reversals for loans & other
losses (1,105,956) (1,880,141) (672,519) (1,596,610) (1,105,956) (1,880,141) (672,519) (1,596,610)
Net operating income 700,004 6,293,565 1,256,989 6,884,050 647,306 6,179,219 1,233,480 6,751,200
Operating expenses (595,856) (2,619,145) (810,494) (2,712,116) (576,923) (2,543,077) (787,615) (2,617,826)
Personnel Expenses (293,554) (1,476,594) (442,618) (1,604,259) (267,837) (1,426,740) (421,065) (1,546,163)
Other Operating Expenses (234,099) (874,223) (307,392) (880,154) (242,962) (856,811) (309,529) (854,242)
Depreciation and Amortization (68,203) (268,327) (60,484) (227,703) (66,124) (259,527) (57,021) (217,421)
Operating profit 104,148 3,674,420 446,494 4,171,934 70,382 3,636,141 445,864 4,133,374
Non operating income 4,883 34,916 671,667 695,195 3,317 3,317 650,919 650,919
Non operating expense (5,567) (6,288) (315,658) (315,658) (5,567) (6,288) (297,758) (297,758)
Profit before income tax 103,464 3,703,048 802,503 4,551,471 68,132 3,633,171 799,025 4,486,534
Income tax expense
Current Tax 7,085 (1,079,831) (43,762) (1,182,137) 15,485 (1,054,026) (31,239) (1,153,110)
Deferred Tax (7,492) (7,492) (7,305) (7,305) (7,492) (7,492) (9,311) (9,311)
Profit for the period 103,056 2,615,724 751,437 3,362,030 76,125 2,571,652 758,475 3,324,113
 Statement of Other Comprehensive Income

NPR in '000
Group Bank

Previous Year Corresponding Previous Year Corresponding

Current Year Current Year
Particulars Notes (Audited) (Audited)

Up to This Quarter Up to This Quarter Up to This Up to This Quarter

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

Profit for the year 103,056 2,615,724 751,437 3,362,030 76,125 2,571,652 758,475 3,324,113
Other comprehensive income/(expense), net of tax
a) Items that will not be reclassified to profit or loss
– Gains/(losses) from investments in equity
instruments measured at fair value 239,651 336,353 4,476 (57,716) 239,651 336,353 19,102 (43,089)
– Gains/(losses) on revaluation
– Actuarial gains/(losses) on defined benefit plans (342) (342) (342) (342)
– income taxes (71,895) (100,906) (1,240) 17,417 (71,895) (100,906) (5,628) 13,029

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 taxes relating to above items
– reclassify to profit or loss

c) Share of other comprehensive income of associates

accounted as per equity method

Other comprehensive income /(loss) for the year, net of

income tax 167,756 235,447 2,894 (40,640) 167,756 235,447 13,132 (30,402)

Total comprehensive income for the year 270,812 2,851,171 754,331 3,321,390 243,881 2,807,099 771,607 3,293,711

Total comprehensive income for the year attributable to:

– Equity holders of the Bank 270,812 2,851,171 754,581 3,325,446 243,881 2,807,099 771,607 3,293,711
– non-controlling interests (251) (4,057)
Total comprehensive income for the year 270,812 2,851,171 754,331 3,321,390 243,881 2,807,099 771,607 3,293,711
Earnings Per share
Basic earning per share 18.38 26.76 18.07 26.43
Annualized basic earning per share 18.38 26.76 18.07 26.43
Diluted earnings per share 18.38 26.76 18.07 26.43
Ratios:
Group Bank
Previous Year Previous Year
Current Year Current Year
Corresponding Corresponding
Particulars Up to This Up to This Up to This Up to This
This This This
Quarter Quarter Quarter This Quarter Quarter
Quarter Quarter Quarter
(YTD) (YTD) (YTD) (YTD)
Capital Fund to RWA 13.23% 13.26% 13.23% 13.26%
Non-Performing Loan (NPL) to Total Loan 2.91% 2.78% 2.91% 2.78%
Total Loan Loss Provision to Total NPL 150.08% 118.86% 150.08% 118.86%
Cost of Funds 5.85% 6.31% 5.85% 6.31%
Credit to Deposit Ratio 72.93% 71.97% 72.93% 71.97%
Base Rate (Month end) 7.51% 8.33% 7.51% 8.33%
Interest Rate Spread 3.99% 5.23% 3.99% 5.23%

Net Liquid Assets/Total Deposit 29.68% 29.48% 29.68% 29.48%

Basic Earning Per share (EPS) Annualized 18.38 26.76 18.07 26.43
Market Price per Share 431 519 431 519
PE Ratio 23.45 19 24 20
Networth Per Share 194 201 192 199
Total Assets Per Share 1,434 1,452 1,426 1,392
 Nepal Investment Bank Limited
Condensed Consolidated Statement of Changes in Equity
For the period (Shrawan 1st 2076 to Ashad 31 2077) ended Ashad 2077
Group NPR in '000

Attributable to equity holders of the Bank

Total Equity
Debenture Capital Investment Non-
Retained Exchange Assets Revaluation Fair value Actuary Gain Regulatory Other
Share Capital Share premium General reserve Redemption Adjustment Adjustment Total Controlling Total Equity
earning equalisation reserve Reserve reserve / (loss) Reserves Reserves
Reserve Reserve Reserve Interest

Balance at Shrawan 1, 2075 10,645,599 1,718,454 2,933,950 4,785,059 83,734 1,560,760 1,085,714 550,468 129,199 75,764 (50,407) 1,507,845 43,806 25,069,947 15,252 25,085,198
Profit for the year - - 3,366,086 - - - - - - - - - - 3,366,086 (4,057)
Other comprehensive income - - - - - - - (40,401) - - (239) - - (40,640)
Total comprehensive income - - 3,366,086 - - - - (40,401) - - (239) - - 3,325,446 (11,195)
Business Combination 279,842 3,402 (51,771) 44,620 - - - - - 2,678 - - 1,071 279,842
Transfer to reserve during the year - - (1,600,674) 664,823 6,147 - 178,571 - - (12,689) - 235,932 (23,558) (551,448)
Contributions from and distributions to owners - - -
Share issued - - - - - - - - - - - - - -
Share based payments 28,100 - - - - - - - - - - - - 28,100
Dividends to equity holders - - - - - - - - - - - - - -
Bonus shares issued - - - - - - - - - - - - - -
Cash dividend paid 1,916,208 (1,616,208) (2,344,057) - - - (300,000) - - - - - - (2,344,057)
Others - - - - - - - - - - - - -
Total contributions by and distributions 1,944,308 (1,616,208) (2,344,057) - - - (300,000) - - - - - - (2,315,956)
Balance at Ashad end 2076 12,869,749 105,649 2,303,535 5,494,502 89,881 1,560,760 964,286 510,067 129,199 65,752 -50,646 1,743,777 21,319 25,807,830 - 25,807,830

Balance at 1 Shrawan 2076 12,869,749 105,649 2,303,535 5,494,502 89,881 1,560,760 964,286 510,067 129,199 65,752 (50,646) 1,743,777 21,319 25,807,830 - 25,807,830
Profit for the year 2,615,724 2,615,724 - -
Other comprehensive income - - - - - - - 235,447 - - - - - 235,447
Total comprehensive income - - 2,615,724 - - - - 235,447 - - - - - 2,851,171 -
Business combination - - - - - - - - - - - - - -
Transfer to reserve during the year - - (1,919,286) 514,330 14,098 - 511,905 - - - - 893,073 (14,121) -

Contributions from and distributions to owners - - - - - - - - - - - - - -

Share issued 27,882 - - - - - - - - - - - - 27,882 -

Share based payments - - - - - - - - - - - - - -
Dividends to equity holders -
Bonus shares issued 1,351,324 (73,050) - - - - - - - - - (1,278,274) - -
Cash dividend paid - - (1,096,628.67) - - - - - - - - - - (1,096,629)
Other - - - - - - - - - - - - - -
Total contributions by and distributions 1,379,205 (73,050) (3,015,914) 514,330 14,098 - 511,905 - - - - (385,201) (14,121) (1,068,747) -
Balance at Ashad End 2077 14,248,954 32,599 1,903,345 6,008,832 103,979 1,560,760 1,476,190 745,514 129,199 65,752 (50,646) 1,358,576 7,198 27,590,255 - 27,590,255
14,248,954,500 32,598,859 1,903,345,432 6,008,832,231 103,979,477 1,560,760,238 1,476,190,475 745,513,597 129,199,207 65,752,368 (50,645,765) 1,358,576,066 - 11,993,573
0 0 0 0 0 0 0 0 0 0 0 0 15,596,682

Bank NPR in '000

Attributable to equity holders of the Bank
Debenture Capital Investment Non-
Total equity Retained Exchange Assets Revaluation Fair value Actuary Gain Regulatory Other
Share Capital Share premium General reserve Redemption Adjustment Adjustment Total equity Controlling Total Equity
earning equalisation reserve Reserve reserve / (loss) Reserves Reserves
Reserve Reserve Reserve Interest

Balance at Shrawan 1, 2075 10,645,599 1,718,454 2,735,026 4,785,059 83,734 1,560,760 1,085,714 550,468 129,199 75,764 (50,407) 1,507,845 43,806 24,871,022 - 24,871,022
Profit for the year 3,324,113 3,324,113
Other comprehensive income (30,162) (239) (30,402)
Total comprehensive income - - 3,324,113 - - - - (30,162) - - (239) - - 3,293,711
Business combination 279,842 3,402 (51,771) 44,620 - - - - - 2,678 - - 1,071 279,842
Transfer to reserve during the year - - (1,600,674) 664,823 6,147 - 178,571 - - (12,689) - 235,932 (23,558) (551,448)
Contributions from and distributions to owners
Share issued 28,100 - - - - - - - - - - - 28,100
Share based payments - - - - - - - - - - - - -
Dividends to equity holders - - - - - - - - - - - - -
Bonus shares issued 1,916,208 (1,616,208) - - - - (300,000) - - - - - -
Cash dividend paid - - (2,342,032) - - - - - - - - - (2,342,032)
Others - - - - - - - - - - - - -
Total contributions by and distributions 1,944,308 (1,616,208) (2,342,032) - - - (300,000) - - - - - - (2,313,931)
Balance at Ashad end 2076 12,869,749 105,649 2,064,662 5,494,502 89,881 1,560,760 964,286 520,305 129,199 65,752 -50,646 1,743,777 21,319 25,579,196 - 25,579,196

Balance at 1 Shrawan 2076 12,869,749 105,649 2,064,662 5,494,502 89,881 1,560,760 964,286 520,305 129,199 65,752 (50,646) 1,743,777 21,319 25,579,196 - 25,579,196
Profit for the year 2,571,652 2,571,652
Other comprehensive income 235,447 235,447
Total comprehensive income - - 2,571,652 - - - - 235,447 - - - - - 2,807,099
Business combination -
Transfer to reserve during the year - - (1,919,286) 514,330 14,098 - 511,905 - - - 893,073 (14,121) 0
Contributions from and distributions to owners -
Share issued 27,882 - - - - - - - - - - - 27,882
Share based payments - - - - - - - - - - - - -
Dividends to equity holders - - - - - - - - - - - - -
Bonus shares issued 1,351,324 (73,050) - - - - - - - - (1,278,274) -
Cash dividend paid - - (1,093,929) - - - - - - - - - (1,093,929)
Other - - - - - - - - - - - - -
Total contributions by and distributions 1,379,205 (73,050) (3,013,214) 514,330 14,098 - 511,905 - - - - (385,201) (14,121) (1,066,047)
Balance at Ashad End 2077 14,248,954 32,599 1,623,100 6,008,832 103,979 1,560,760 1,476,190 755,752 129,199 65,752 (50,646) 1,358,576 7,198 27,320,248 27,320,248
 Nepal Investment Bank Limited
Condensed Consolidated Statement of Cash Flows
For the Period (Shrawan 2076 to Ashad 2077) ended Ashad 2077
NPR in '000
Group Bank
Particulars Corresponding Previous Corresponding Previous
Up to This Quarter Up to This Quarter
Year Up to This Quarter Year Up to This Quarter

CASH FLOWS FROM OPERATING ACTIVITIES

Interest received 14,098,821 14,529,568 14,098,821 14,451,892
Fees and other income received 1,669,792 1,517,584 1,491,455 1,431,520
Divided received 105,278 91,440 105,278 91,440
Receipts from other operating activities 996,720 997,590 996,720 979,733
Interest paid (9,310,940) (8,941,001) (9,310,940) (8,941,001)
Commission and fees paid (315,998) (348,295) (315,998) (339,737)
Cash payment to employees (1,426,740) (1,594,798) (1,426,740) (1,546,163)
Other expense paid (3,088,207) (259,655) (2,999,449) (230,001)

Operating cash flows before changes in operating assets and liabilities

2,728,725 5,992,431 2,639,146 5,897,684
(Increase)/Decrease in operating assets
Due from Nepal Rastra Bank (3,461,048) 1,646,511 (3,461,048) 1,646,511
Placement with bank and financial institutions 533,982 964,126 533,982 964,126
Other trading assets - - - -
Loan and advances to bank and financial institutions (645,646) (1,789,384) (645,646) (1,789,384)
Loans and advances to customers (11,505,926) (6,471,369) (11,505,926) (6,471,369)
Other assets 2,005,437 (2,486,630) 2,008,374 (2,484,225)
Increase/(Decrease) in operating liabilities - - - -
Due to bank and financial institutions (328,746) 1,095,455 (328,746) 1,095,455
Due to Nepal Rastra Bank (937,544) 434,418 (937,544) 434,418
Deposit from customers 16,982,046 10,724,031 16,969,844 10,759,805
Borrowings - - - -
Other liabilities (243,867) (2,257,787) (324,539) (895,395)
Net cash flow from operating activities before tax paid - - - -
Income taxes paid (1,087,323) (1,325,960) (1,061,519) (1,307,437)
Net cash flow from operating activities 4,040,089 6,525,843 3,886,379 7,850,188

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investment securities (6,620,159) (3,780,312) (6,272,832) (3,545,496)
Receipts from sale of investment securities - - - -
Purchase of property and equipment 38,742 (522,799) 31,701 (516,132)
Receipt from the sale of property and equipment - 15,983 - 15,433
Purchase of intangible assets (33,587) (29,164) (33,991) (29,164)
Receipt from the sale of intangible assets - - - -
Subsidiary - 59,858 - 66,660
Associates 1 (49,076) 1 (49,076)
Purchase of investment properties (51,893) (197,531) (51,893) (197,531)
Receipt from the sale of investment properties - - - -
Interest received - - - -
Dividend received - - - -
Net cash used in investing activities (6,666,895) (4,503,041) (6,327,013) (4,255,305)

CASH FLOWS FROM FINANCING ACTIVITIES

Receipt from issue of debt securities - 2,000,000 - 2,000,000
Repayment of debt securities - - - -
Receipt from issue of subordinated liabilities - - - -
Repayment of subordinated liabilities - - - -
Receipt from issue of shares 27,882 28,100 27,881.74 28,100
Dividends paid (1,147,929) (2,382,532) - 1,093,928.67 (2,342,032)
Interest paid - - -
Other receipt/payment - - - -
Net cash from financing activities (1,120,047) (354,431) - 1,066,046.93 (313,931)
Cash Flow From Merger & Acquisition Activities - 279,842 - 279,842
Net increase (decrease) in cash and cash equivalents (3,746,853) 1,948,212 (3,506,681) 3,560,794
Cash and cash equivalents at Shrawan 1, 2076 14,057,181 12,108,969 13,520,574 9,959,781
Effect of exchange rate fluctuations on cash and cash equivalents held
Cash and cash equivalents at Ashad end 2077 10,310,328 14,057,181 10,013,893 13,520,574
 Nepal Investment Bank Limited
Interim Financial Statements 2019-20 (4th Quarter)

Nepal Investment Bank Limited Group

Notes to the Consolidated Financial Statements
For the year ended Ashad 31, 2077 (15 July 2020)

1. Basis of preparation
The consolidated interim financial statements of the group and the separate interim financial statements of NIBL for the fourth quarter of current FY 2076-77 ending 15th July 2020 (31st
Ashad 2077) have been prepared in accordance with the requirements of Nepal Financial Reporting Standards (NFRS) and directives of Nepal Rastra Bank.

2. Statement of Compliance with NFRSs

The consolidated interim financial statements of the group and the separate interim financial statements of NIBL for the fourth quarter of current FY 2076-77 ending 15th July 2020 (31st
Ashad 2077) have been prepared in accordance with the requirements of Nepal Financial Reporting Standards (NFRS) including the carve outs issued by ICAN.

3. Use of Estimates, assumptions and judgements

The preparation of financial information requires the use of estimates and judgements about future conditions. In view of the inherent uncertainties and the high level of subjectivity
involved in the recognition or measurement of items listed below, it is possible that the outcomes in the next period could differ from those on which management’s estimates are based,
resulting in materially different conclusions from those reached by management for the purposes of this financial statements.

Management’s selection of the accounting policies, which contain critical estimates and judgements, is listed below; it reflects the materiality of the items to which the policies are applied,
the high degree of judgement and estimation uncertainty involved:
• Impairment of loans and advances
• Valuation of financial instruments
• Provisions
• Estimation of useful lives of property and equipment and intangible assets

4. Changes in accounting policies

NFRS requires the company to adopt accounting policies that are most appropriate to the company’s circumstances. The bank has been adopting accounting policies to ensure compliance
with NFRS. Specific accounting policies have been included in the section 5 of the notes for each items of financial statements which requires disclosures of accounting policies or changes
in accounting policies. Effect and nature of the changes, if any, have been disclosed wherever applicable.

5. Significant accounting policies

5.1. Basis of measurement

The financial information has been prepared under the historical cost convention, as modified by the revaluation of property and equipment, fair value measurement of financial assets
and liabilities wherever the standard requires or provides option for such measurements.

5.2. Basis of consolidation

The group controls and consequently consolidates an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. Control is initially assessed based on consideration of all facts and circumstances, and is subsequently reassessed when there are significant

Page 1 of 17
 Nepal Investment Bank Limited
Interim Financial Statements 2019-20 (4th Quarter)

changes to the initial setup. Where an entity is governed by voting rights, the group would consolidate when it holds, directly or indirectly, the necessary voting rights to pass resolutions
by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors, including having exposure to variability of returns, power
over the relevant activities or holding the power as agent or principal. The cost of an acquisition is measured at the fair value of the consideration, including contingent consideration,
given at the date of exchange. Acquisition-related costs are recognised as an expense in the income statement in the period in which they are incurred. The acquired identifiable assets,
liabilities and contingent liabilities are generally measured at their fair values at the date of acquisition. Goodwill is measured as the excess of the aggregate of the consideration
transferred, the amount of non-controlling interest and the fair value of the group’s previously held equity interest, if any, over the net of the amounts of the identifiable assets acquired
and the liabilities assumed.
a. Non-controlling interest (NCI): The amount of non-controlling interest is measured either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s
identifiable net assets. For acquisitions achieved in stages, the previously held equity interest is re-measured at the acquisition-date fair value with the resulting gain or loss
recognised in the income statement.
b. Subsidiaries - Carve out not Taken
Subsidiary of Bank, NIBL Ace Capital Limited, has applied NFRS in preparation of their financial statements, which have been consolidated in NIBL Group consolidated financial
statements under NFRS. The Financial Statements of the Bank’s Subsidiaries are prepared for the same reporting period as per the Bank, using consistent accounting policies.
Carve out Taken - Associates
National Microfinance Bittiya Sanstha Limited , M Nepal Ltd and Flexiterm Private Limited the group’s associate companies has not been prepared its financial statements in
accordance with NFRS however the Group has applied equity accounting for recognition and presentation of its associates. The Bank in its standalone financial statements has
recognised its investment in associates at cost under NAS 27.
c. Loss of Control –
Upon the loss of control, the Bank derecognizes the assets and liabilities of the Subsidiary, any non-controlling interests and other components of equity related to the subsidiary. Any
surplus or deficit arising on the loss of control is recognized in the Statement of Profit or loss. If the Bank 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 equity-accounted investee or in accordance with the Bank’s accounting policy for financial
instruments depending on the level of influence retained.
d. Special Purpose Entity (SPE) – the bank does not have any investment in special purpose entities.
e. All intra-group transactions are eliminated on consolidation.
Intra group balances and transactions, any unrealized income and expenses arising from intra group transactions, are eliminating in preparing the consolidated financial statements.
Unrealized gains/losses arising from transactions with equity accounted investees are eliminated against the investments to the extent of group interest of investee.

5.3. Cash and cash Equivalent

Cash and cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Such
investments are normally those with less than three months’ maturity from the date of acquisition. Cash and cash equivalent are classified as financial assets and treated accordingly.

For the purposes of the cash flow statement, cash and cash equivalents comprise cash and non-mandatory balances with central banks and amounts due from banks with a maturity of
less than three months. Cash and cash equivalent are carried at amortized cost in the Statement of Financial Position.

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5.4. Financial Instruments: Financial Assets and Financial Liabilities

Financial asset is any asset that is:
(a) cash
(b) an equity instrument of another entity;
(c) a contractual right:
i) to receive cash or another financial asset from another entity; or
ii) to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity; or
(d) a contract that will or may be settled in the entity's own equity instruments and is:
(i) a non-derivative for which the entity is or may be obliged to receive a variable number of the entity's own equity instruments; or
(ii) a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity's own equity
instruments.
Financial liability is any liability that is:
a) contractual obligation:
(i) to deliver cash or another financial asset to another entity; or
(ii) to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the entity; or
(b) a contract that will or may be settled in the entity’s own equity instruments and is:
(i) a non-derivative for which the entity is or may be obliged to deliver a variable number of the entity’s own equity instruments; or
(ii) a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity
instruments.

5.4.1. Recognition
Bank / group recognises financial assets or a financial liabilities in its statement of financial position when, and only when, it becomes a party to the contractual provisions of the
instrument.

5.4.2. Classification
Financial assets are classified under three categories, namely,
 Fair Value through Profit or Loss,
 Fair Value Though Other Comprehensive Income
 At Amortised Cost
Financial liabilities are classified under two categories, namely,
 Fair Value through Profit or Loss,
 Held at amortised cost

5.4.3. Measurement

At initial recognition, the bank measures financial instruments (financial assets and liabilities) at its fair value plus, in the case of a financial asset not at fair value through profit or loss,
transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit
or loss.
Subsequent measurement – financial assets
 Financial assets other than recognised at amortised cost are measured and reported at fair value.

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 Assets classified as held at amortised costs are carried at amortised costs using effective interest rate. (Bank has availed carve-out exemption for computation of effective
interest)
Subsequent measurement – financial liabilities.
 Financial liabilities carried at fair value are measured and reported at fair value.
 Other financial liabilities are carried at amortised cost.

Gain or loss
Gain or loss arising from changes in the fair value of a financial asset or financial liability are recognised, as follows.
 A gain or loss on a financial asset or financial liability classified as at fair value through profit or loss shall be recognised in profit or loss.
 A gain or loss on a financial asset or financial liability classified as at fair value through OCI shall be recognised in other comprehensive income

5.4.4. De-recognition
Bank derecognises financial assets when, and only when:
• the contractual rights to the cash flows from the financial asset expire; or
• It transfers the financial asset and the transfer qualifies for de-recognition.

Bank removes financial liabilities (or a part of a financial liabilities) from its statement of financial position when, and only when, it is extinguished: i.e. when the obligation specified in the
contract is discharged or cancelled or expires.

5.4.5. Determination of fair value

Fair values of financial assets and liabilities are determined according to the following hierarchy:
• Level 1 – valuation technique using quoted market price: financial instruments with quoted prices for identical instruments in active markets that the group can access at the
measurement date.
• Level 2 – valuation technique using observable inputs: financial instruments 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. For the listed securities where the bank holds promoter
shares which are priced and traded differently in the market than ordinary shares the bank has considered the valuation of similar promoters shares traded in the market which
approximates to 50% of the price that the ordinary shares are traded.
• Level 3 – valuation technique with significant unobservable inputs: financial instruments valued using valuation techniques where one or more significant inputs are unobservable,
where market prices are not available then the bank considers the carrying value and future cash flows from the financial instruments.

5.4.6. Impairment

Impairment of financial assets held at amortised costs

Impairment of financial assets is considered when the carrying values of the assets are more than the recoverable amount from the assets. Impairment is tested for all financial assets
except those measured at fair value.

Impairment of loans and advances to customers and bank and financial institutions
Losses for impaired loans are recognised promptly when there is objective evidence that impairment of a loan or portfolio of loans has occurred. Impairment allowances that are
calculated on individual loans or on groups of loans assessed collectively are recorded as charges to the profit or loss and are recorded against the carrying amount of impaired loans on
the statement of financial position. Losses, which may arise from future events are not recognised.

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The process of impairment followed by the bank under NAS 39 is as under

 Bank individually assesses for impairment of loans and advances for all loans that are overdue.
 When testing for impairment if there is no indication of impairments such loans and advances are considered for collective assessment. If there is an indication of impairment
then impairment is charged loans and advances on individual basis.
 If the loans and advances are not overdue and do not indicate any trigger events that would require detailed impairment testing such loans and advances are categorised for
collective assessment of impairment.
 When triggers are identified for individually significant loans and advances they are tested for impairment.
 Impairment is specifically (individually) assessed and charged for overdue loans and advances.
 Collective assessment is based on the risk assessment, risk categories and risk classification of loans and advances.

Individually assessed loans and advances

The criteria used to make this assessment include:
• known cash flow difficulties experienced by the borrower;
• contractual payments of either principal or interest being past due for more than 90 days;
• the probability that the borrower will enter bankruptcy or other financial realisation;
• a concession granted to the borrower for economic or legal reasons relating to the borrower’s financial difficulty that results in forgiveness or postponement of principal, interest or
fees, where the concession is not insignificant; and
• There has been deterioration in the financial condition or outlook of the borrower such that its ability to repay is considered doubtful. For loans where objective evidence of
impairment exists, impairment losses are determined considering the following factors:
–the group’s aggregate exposure to the customer;
–the viability of the customer’s business model and their capacity to trade successfully out of financial difficulties and generate sufficient cash flow to service debt obligations;
–the amount and timing of expected receipts and recoveries;
–the likely dividend available on liquidation or bankruptcy;
–the extent of other creditors’ commitments ranking ahead of, or paripassu with, the group and the likelihood of other creditors continuing to support the company;
–the complexity of determining the aggregate amount and ranking of all creditor claims and the extent to which legal and insurance uncertainties are evident;

• the realisable value of security (or other credit mitigants) and likelihood of successful repossession;
• the likely costs of obtaining and selling collateral as part of foreclosure;
• the ability of the borrower to obtain, and make payments in, the currency of the loan if not denominated in local currency; and
• when available, the secondary market price of the debt.

The determination of the realisable value of security is based on the market value at the time the impairment assessment is performed. The value is not adjusted for expected future
changes in market prices, though adjustments are made to reflect local conditions such as forced sale discounts. Impairment losses are calculated by discounting the expected future cash
flows of a loan, which includes expected future receipts of contractual interest, at the loan’s original effective interest rate and comparing the resultant present value with the loan’s
current carrying amount. The impairment allowances on individually significant accounts are reviewed at least quarterly and more regularly when circumstances require.

Collectively assessed loans and advances

Impairment is assessed collectively to cover losses, which have been incurred but have not yet been identified on loans subject to individual assessment or for homogeneous groups of
loans that are not considered individually significant. All individually significant loans and advances and 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 that are not individually significant are collectively
assessed for impairment by grouping together loans and advances with similar risk characteristics.

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Impairment of loans and advances portfolios are based on the judgments in past experience of portfolio behaviour. In assessing collective impairment the Bank uses historical trends of
the probability of default by analyzing data of last twenty quarters, 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. When information becomes available which identifies losses on individual loans
within the group, those loans are removed from the group and assessed individually. 

The entire loan portfolio has been segregated into eight portfolio categories considering similar characterises, risk profile and other similar attributes of the loans. The collective
impairment allowance is determined using statistical methods by calculating probability of default (PD) and Loss given Default (LGD) for each portfolio or homogeneous groups of loans
not considered individually significant and not specifically impaired.

Reversals of impairment
If the amount of an impairment loss decreases in a subsequent period, and the decrease can be related objectively to an event occurring after the impairment was recognised, the excess
is written back by reducing the loan impairment allowance account accordingly. The write-back is recognised in the profit and loss statement.

Write-off of loans and advances

Loans (and the related impairment allowance accounts) are normally written off, either partially or in full, when there is no realistic prospect of recovery. Where loans are secured, this is
generally after receipt of any proceeds from the realisation of security. In circumstances where the net realisable value of any collateral has been determined and there is no reasonable
expectation of further recovery, write-off may be earlier.

Carve out – Loans and Advances Impairment

The regulators have provided a mandatory carve-out for charging impairment of loans and advances. The carve-out indicates that the bank needs to assess its impairment of loans and
advances under NFRS and calculate impairment under rule based impairment model of Directive 2 of Nepal Rastra Bank. Then higher impairment of the two methods needs to be
recognised in the financial statements, with additional disclosure of the loans and advances had the other methods been applied for comparison purpose. The bank for the interim period
ended on Ashad 2077 has assessed the impairment under NFRS impairment model and under NRB Directives. Since the impairments under NRB directives are more than under NFRS, the
bank has recognised impairment calculated under NRB directives.

5.4.7. Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there
is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously (‘the offset criteria’).

5.5. Trading Assets

Financial assets are classified as trading assets (held for trading) if they have been acquired principally for the purpose of selling in the near term, or form part of a portfolio of identified
financial instruments that are managed together and for which there is evidence of a recent pattern of short- term profit-taking. They are recognised on trade date, when the group enters
into contractual arrangements with counterparties, and are normally derecognised when sold. They are initially measured at fair value, with transaction costs taken to the income
statement. Subsequent changes in their fair values are recognised in the income statement in ‘Net trading income’.

5.6. Derivative Assets and derivative liabilities

Derivatives are financial instruments that derive their value from the price of underlying items such as equities, bonds, interest rates, foreign exchange, credit spreads, commodities and
equity or other indices. Derivatives are initially recognised, and are subsequently re-measured, at fair value. Fair values of derivatives are obtained either from quoted market prices or by
using valuation techniques.

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Embedded derivatives are bifurcated from the host contract when their economic characteristics and risks are not clearly and closely related to those of the host non-derivative contract,
their contractual terms would otherwise meet the definition of a stand-alone derivative and the combined contract is not held for trading or designated at fair value. The bifurcated
embedded derivatives are measured at fair value with changes therein recognised in the income statement.

5.7. Property and equipment

Property and Equipment except freehold land are stated at historical cost, or fair value at the date of transition to NFRS (‘deemed cost’), less impairment losses and depreciation over their
estimated useful lives. Freehold land are periodically assessed for their fair value and reported at revalued amount. The excess of fair value over the cost of freehold land is recognized in
equity as revaluation reserve.

Depreciation is made on the following basis

Asset Class Useful life / years (%)
Land Not depreciated
Building 50 (2%)
Leasehold Properties 6.67 (15%)
Computer & accessories 5 (20%)
Vehicles 6.67 (15%)
Furniture 6.67 (15%)
Machinery 6.67 (15%)
Equipment & others 6.67 (15%)

Property and equipment is subject to an impairment review if their carrying amount may not be recoverable. Leasehold properties are depreciated over 6.67 years or over the remaining
useful life, whichever is lower. Depreciation on property and equipment is charged from next month of purchase. No depreciation is charged in the month of disposal.

Low value assets costing less than NRs 10,000 each are charged as operational expenses in the year of purchase. The assets’ residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In
the event that an asset’s carrying amount is determined to be greater than its recoverable amount it is written down immediately. The recoverable amount is the higher of the asset’s fair
value less costs to sell and its value in use. For the first time adoption of NFRS land properties, under the ownership and control of the bank, have been revalued to reflect the value of
those properties. The excess of the carrying value and the market value is taken to the equity as revaluation reserve.

5.8. Goodwill and intangible assets

Goodwill arises on the acquisition of subsidiaries, when the aggregate of the fair value of the consideration transferred, the amount of any non- controlling interest and the fair value of
any previously held equity interest in the acquire exceed the amount of the identifiable assets and liabilities acquired. If the amount of the identifiable assets and liabilities acquired is
greater, the difference is recognised immediately in the profit and loss. Goodwill is allocated to cash-generating units (‘CGU’s) for the purpose of impairment testing, which is undertaken
at the lowest level at which goodwill is monitored for internal management purposes. Impairment testing is performed at least annually, or whenever there is an indication of impairment,
by comparing the recoverable amount of a CGU with its carrying amount. The carrying amount of a CGU is based on its assets and liabilities, including attributable goodwill. The
recoverable amount of an asset is the higher of its fair value less cost to sell and its value in use. Value in use (‘VIU’) is the present value of the expected future CGU cash flows. If the
recoverable amount is less than the carrying value, an impairment loss is charged to the income statement. Goodwill is carried on balance sheet at cost less accumulated impairment
losses. At the date of disposal of a business, attributable goodwill is included in the group’s share of net assets in the calculation of the gain or loss on disposal.

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Intangible assets are recognised separately from goodwill when they are separable or arise from contractual or other legal rights, and their fair value can be measured reliably. These
intangible assets are recognised at historical cost less impairment less amortisation over their estimated useful life.

Amortisation is made on the following basis

Asset Class Useful life
Software 5

5.9. Investment property

Land or a building or part of a building or both owned by the bank or held by the bank as the lessee under a finance lease to earn rentals or for capital appreciation or both, rather than
for:
• use in the production or supply of goods or services or for administrative purposes; or
• sale in the ordinary course of business.
are classified as investment properties
Investment properties are measured initially at its cost. Transaction costs are included in the initial measurement. After initial recognition, the bank chooses the cost model to measure its
investment properties in accordance with NAS 16.

5.10. Income Tax

Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive
income or directly in equity, in which case it is recognised in the same statement in which the related item appears. Current tax is the tax expected to be payable on the taxable profit for
the year, calculated using tax rates enacted or substantively enacted by the reporting date, and any adjustment to tax payable in respect of previous years. Current tax assets and liabilities
are offset when the group intends to settle on a net basis and the legal right to offset exists.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the balance sheet and the amounts attributed to such assets and liabilities
for tax purposes. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future
taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax is calculated using the tax rates expected to apply in the periods in which the assets will be realised or the liabilities settled, based on tax rates and laws enacted, or
substantively enacted, by the balance sheet date. Deferred tax assets and liabilities are offset when they arise in the same tax reporting group and relate to income taxes levied by the
same taxation authority, and when the group has a legal right to offset.

Deferred tax relating to actuarial gains and losses on post-employment benefits is recognised in other comprehensive income. Deferred tax relating to share-based payment transactions
is recognised directly in equity to the extent that the amount of the estimated future tax deduction exceeds the amount of the related cumulative remuneration expense. Deferred tax
relating to fair value re-measurements of available-for-sale investments and cash flow hedging instruments is credited or charged directly to other comprehensive income and is
subsequently recognised in the income statement when the deferred fair value gain or loss is recognised in the income statement.

5.11. Deposits, debt securities issued and subordinated liabilities

Borrowings (which include deposits from banks, customer deposits, debt securities in issue and subordinated liabilities) are recognised initially at fair value, being their issue proceeds net
of transaction costs incurred. These instruments are subsequently stated at amortised cost using the effective interest method.

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5.12. Provisions
Provisions are recognised when it is probable that an outflow of economic benefits will be required to settle a current legal or constructive obligation, which has arisen as a result of past
events, and for which a reliable estimate can be made. Judgement is involved in determining whether a present obligation exists and in estimating the probability, timing and amount of
any outflows. Professional expert advice is taken on the assessment of litigation, property (including onerous contracts) and similar obligations wherever necessary.

5.13. Revenue recognition

Interest income
i. Interest income are recognised under accrual basis in the profit or loss for all interest-bearing financial instruments.
ii. The bank has recognised interest income on loans and advances as per the guidelines prescribed by Nepal Rastra Bank through NRB Circular number 1 dated 2076/04/10.
iii. Bank has provided interest rebate of NPR 22,881,269 on loans and advances as prescribed by Nepal Rastra Bank through NRB Circular number 18 dated 2076/12/16.

The criteria for determining when interest income recognition should be suspended as per the NRB circular are as follows:

a. Loans where there is reasonable doubt about the ultimate collectability of principal or interest;
b. Loans against which individual impairment as per NAS 39 or life time impairment as per NFRS 9 has been made;
c. 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;
d. Loans where contractual payments of principal and/or interest are more than 12 months in arrears, irrespective of the net realizable value of collateral;
e. Overdrafts and other short term facilities which have not been settled after the expiry of the loan and even not renewed within 3 months of the expiry, and where the net realizable
value of security is insufficient to cover payment of principal and accrued interest;
f. Overdrafts and other short term facilities which have not been settled after the expiry of the loan and even not renewed within 12 months of the expiry, irrespective of the net
realizable value of collateral;.

Notwithstanding anything contained in this paragraph, the suspended interest shall be recognized as income in profit or loss when the interest is receipt by the bank.

Bank shall accrue the interest on loan although it has been decided to suspend the recognition of income. However, bank shall cease to accrue interest on loan, in case where contractual
payments of principal and/or interest of the loan are due for more than 12 months and the “net realizable value” of security is insufficient to cover payment of principal and accrued
interest. Cessation of accrual of interest for accounting purpose shall not preclude the bank to continue to accrue interest on a memorandum basis for legal enforcement purposes unless
the loan is written off.

NFRS Requirement
NFRS requires interest income to be recognised using the effective interest method, except for those classified at fair value through profit or loss. The effective interest method is a
method of calculating the amortised cost of a financial asset and of allocating the interest income over the expected life of the financial instrument. The effective interest rate is the rate
that exactly discounts the estimated future cash payments or receipts over 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. The effective interest rate is calculated on initial recognition of the financial asset or liability by estimating the future cash flows after considering
all the contractual terms of the instrument but not future credit losses. The calculation includes all amounts expected to be paid or received by the Bank including expected early
redemption fees and related penalties and premiums and discounts that are an integral part of the overall return. Direct incremental transaction costs related to the acquisition, issue or

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disposal of financial instruments is also taken into account in the calculation. 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 recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Carve-out for Effective Interest Rate (EIR) method

The bank has availed the carve-out for interest income recognition by applying the rate implicit on individual products. Considering the amount of renewal and initial service fees that the
bank charges on the loans and advances(which is less than 1%), applying EIR method would not be practical and cost effective. Hence, initial service fees and renewal charges have been
recognised during the period when such income accrue rather than being included within the component of interest income under EIR method.

Fees and Commission Income –Fees and commissions, which are not an integral part of the effective interest rate are generally recognised when the service has been provided. Fee
income is earned from a diverse range of services provided by the group to its customers. Loan commitment fees for loans that are likely to be drawn down are deferred (together with
related direct costs) and recognised as an adjustment to the effective interest rate on the loan once drawn. Where it is unlikely that loan commitments will be drawn, loan commitment
fees are recognised over the life of the facility. Loan syndication fees are recognised as revenue when the syndication has been completed and the Bank retains no part of the loan package
for itself or retains a part at the same effective interest rate for all interest-bearing financial instruments, including loans and advances, as for the other participants.

Dividend Income: Dividend income is recognised when the right to receive payment is established. This is the ex-dividend date for listed equity securities, and usually the date when
shareholders approve the dividend for unlisted equity securities.

Net trading income comprises all gains and losses from changes in the fair value of financial assets and financial liabilities held for trading, together with the related interest income,
expense and dividend.

Net income from financial instruments designated at fair value includes all
 gains and losses from changes in the fair value of financial assets and liabilities designated at fair value through profit or loss, including liabilities under investment contracts;
 gains and losses from changes in the fair value of derivatives that are managed in conjunction with financial assets or liabilities designated at fair value through profit or loss; and
 interest income, interest expense and dividend income in respect of
 financial assets and liabilities designated at fair value through profit or loss; and
 derivatives managed in conjunction with the above,
 except for interest arising from the group’s issued debt securities and derivatives managed in conjunction with those debt securities, which is included in ‘Interest expense’.

5.14. Interest expense

Under NFRS Interest expense are recognised in the profit or loss for all interest-bearing financial instruments using the effective interest method. The effective interest method is a
method of calculating the amortised cost of a financial liability and of allocating the interest expense over the expected life of the financial instrument.

5.15. Employee benefits

5.15.1. Current employee benefits costs

Short-term employee benefits, such as salaries, paid absences, performance-based cash rewards and social security costs are recognised over the period in which the employees provide
the related services.

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5.15.2. Post-employment benefits

The bank operates a number of post-employment benefit plans. These plans include both defined benefit and defined contribution plans.

Defined contribution plan

Payments to defined contribution plans where the bank’s obligations are equivalent to a contribution to the defined contribution plan. These are charged as an expense as the employees
render service. The bank operates provident fund scheme under Defined contribution plan. A percentage of basic pay is paid on monthly basis to the plan. The bank has no further
obligation to pay after such contribution even if the plan assets may not be sufficient to pay out to the employees. The plan is managed by a separately registered retirement benefit plan
managed by the employees of the bank. Any further income on such fund belongs to the employees.

Defined benefit plan

The defined benefit plan includes gratuity and accumulated leave compensation payment at the time of retirement. The present value of defined benefit obligations are calculated at the
reporting date by the actuaries. The net charge to the profit and loss comprises the service costs and the net interest on the net defined benefit liability and is presented under staff cost.
However, actuarial valuation of gratuity and leave is done on annual basis only.

The past service cost, which is charged immediately to the income statement, is the change in the present value of the defined benefit obligation for employee service in prior periods
resulting from a plan amendment (the introduction or withdrawal of, or changes to, a defined benefit plan) or curtailment (a significant reduction by the entity in the number of
employees covered by a plan). A settlement is a transaction that eliminates all further legal and constructive obligations for part or all of the benefits provided under a defined benefit plan,
other than a payment of benefits to, or on behalf of, employees that is set out in the terms of the plan and included in the actuarial assumptions.

Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses, return on plan assets (excluding interest) and the effect of the asset ceiling (if any,
excluding interest), are recognised immediately in other comprehensive income. Actuarial gains and losses comprise experience adjustments (the effects of differences between the
previous actuarial assumptions and what has actually occurred), as well as the effects of changes in actuarial assumptions.

The defined benefit asset or liability represents the present value of defined benefit obligations reduced by the fair value of plan assets. Any net defined benefit surplus is limited to the
present value of available refunds and reductions in future contributions to the plan.

Sick Leave and Accumulative Leave

Sick Leave and accumulated leave has been defined as long term employee benefit. Expenses relating to leave benefits, including actuarial gain or loss are charged to profit and loss.

Staff Loans:
The bank provides under listed types of loans to its staffs at the rates mentioned below as per the provisions of employees' bylaws of the bank. The staff loans are shown at fair value in
the financial statements considering the base rate of the bank. However fair value of staff loan is calculated on annual basis only. The subsidized interest is shown as expense in the staff
costs in the income statement.

Land loan: 5%
Social loan: 5%
Vehicle loan: 4%

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Housing loan: tied up with insurance policy

Solar loan: 8%

5.16. Leases
Agreements which transfer substantially all the risks and rewards incidental to the ownership of assets are classified as finance leases. As a lessor under finance leases, the group presents
the amounts due under the leases, after deduction of unearned charges, in ‘Loans and advances to banks’ or ‘Loans and advances to customers’. As a lessee under finance leases, the
group presents the leased assets in ‘Property and equipment’ and the corresponding liability to the lessor is included in ‘Other liabilities’. A finance lease and its corresponding liability are
recognised initially at the fair value of the asset or, if lower, the present value of the minimum lease payments.

All other leases are classified as operating leases. As a lessor, the group presents assets subject to operating leases in ‘Property and equipment’. Impairment losses are recognised to the
extent that the carrying values are not fully recoverable. As a lessee, leased assets are not recognised on the balance sheet. The finance income or charges on finance leases are
recognised in ‘Net interest income’ over the lease periods so as to give a constant rate of return.

The leases entered into by the Bank are primarily operating leases. Operating lease rentals payable are charged to the profit and loss on a straight-line basis over the period of the lease on
annual basis. When an operating lease is terminated before the end of the lease period, any payment made to the lessor by way of penalty is recognised as an expense in the period of
termination.

5.17. Foreign currency translation

Transactions in foreign currencies are recorded in the functional currency at rate of exchange prevailing on the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated into the functional currency at the buying rate of exchange at the balance sheet date. Any resulting exchange differences are included in the profit or loss.
Non-monetary assets and liabilities that are measured at historical cost in a foreign currency are translated into the functional currency using the rate of exchange at the date of the initial
transaction. Non-monetary assets and liabilities measured at fair value in a foreign currency are translated into the functional currency using the rate of exchange at the date the fair value
was determined.

5.18. Financial Guarantee and loan commitments

Financial guarantees, which are not classified as insurance contracts, are the contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security as
well as contingent liabilities related to legal proceedings or regulatory matters are possible obligations that arise from past events whose existence will be confirmed only by the
occurrence, or non-occurrence, of one or more uncertain future events not wholly within the control of the group; or are present obligations that have arisen from past events but are not
recognised because it is not probable that settlement will require the outflow of economic benefits, or because the amount of the obligations cannot be reliably measured. Contingent
liabilities are not recognised in the financial statements but are disclosed unless the probability of settlement is remote.

Loan Commitments
These include the amount of loans approved by the bank but are not yet disbursed /utilised. These include for example overdraft / crash credit limits given to the customers in excess of
already utilised balances where customers can draw down credit facilities, within the limit, without going through any further approval process of the bank.

5.19. Share capital and reserves

Financial instruments issued are classified as equity when there is no contractual obligation to transfer cash, other financial assets or issue a variable number of own equity instruments.
Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds.

Reserves
 Share Premium: Any premium collected on issue of shares to the public is credited to this reserve. This reserve is utilised only for issue of the bonus share capital.

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Interim Financial Statements 2019-20 (4th Quarter)

 Retained Earning: Earning made during the current and previous years not distributed has been credited to this reserve.
 General Reserve: There is a regulatory requirement under Bank and Financial Institutions Act to set aside 20% of the net profit after tax every year as general reserve to build up
the capital until the general reserve fund balance is twice the paid up share capital. This is the restricted reserve and cannot be freely used. The Bank appropriates 20% of the
regulatory net profit every year and transfers to the general reserve fund.
 Exchange equalization reserve: Central bank’s regulatory directives require banks to transfer 25% of the revaluation gain as at the year end to this reserve account. Thus, 25% of
such gains are transferred to the exchange equalization reserve.
 Assets Revaluation Reserve: Bank has revalued its land properties as on the date of transition to NFRS. The upward movement in the value of the land is adjusted by creating an
equivalent amount of revaluation reserve. Bank periodically reviews the fair value of freehold land, as entire class of the assets, and makes changes in the recognised value.
Professional valuations are used to assess the fair value changes.
 Fair value Reserve: Net change in fair value of equity instruments that are measured at fair value and the changes in fair value is presented under this reserve.
 Debenture Redemption Reserve: The Bank sets aside a portion of its profit to create a reserve for repayment of debenture liabilities when they mature. On maturity and
settlement of the debentures there reserves will be available as free reserve.
 Other reserves
o CSR Reserve: Bank has regulatory requirement to set aside 1% of the net profit of previous year for corporate social responsibility activities. The amount spent in the
year is written back from the reserve to retained earnings.
o Staff Training Reserve: Bank has regulatory requirement to set aside the shortfall between amount spent for training and amount calculated at 3% of the previous
year’s staff salary and allowances. Such shortfall amount if any is set aside in the reserves. In case where the amount spent exceeds 3%, the excess is written back from
the reserve.
 Capital adjustment reserve; The amount includes interest income recognized as income on accrual basis in earlier years (vide NRB directives providing relaxation to recognize
accrued income on project loans during the period of earthquake and blockade)
 Investment Adjustment reserve: 100% reserve is created on investments in equity instruments that are not listed and are not exempted by NRB.
 Regulatory reserves: Includes
o Accrued Interest Receivable Reserve
o Bargain Purchase Gain Reserve to the extent not available or not proposed for distribution
o Non-banking Asset Reserve
o Actuarial Loss Reserve and
o Other reserves as prescribed NRB

5.20. Earning per share including diluted

Basic earnings per share are calculated by dividing the net profit attributable to equity shareholders by the weighted average number of ordinary shares in issue during the year. For the
calculation of diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares that arise in
respect of convertible instruments, if any.
5.21. Segment reporting
The bank's business segments are basically identified as banking operations, treasury functions, trade finance business, remittance business and card operations. Measurement of
segmental assets, liabilities, income and expenses is in accordance with the bank’s accounting policies. Branch networks are under regional demarcation for supervision, monitoring and
control. The bank does not have transfer pricing adjustments between its segments and branches /units for allocating costs and revenues. After the restructuring of Nepal under federal
constitution, the bank is considering realigning its management under provincial lines.

Bank’s established departmental operation also allows the management to monitor the bank’s business under the product /service lines. However the costs and revenues are not passed
on between the intra-product & service lines.

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Bank applies following principles for reporting operating segments

 An operating segment is a component of the bank (geographical or product/service line):
 That engages in business activities from which it may earn revenues and incur expenses
 Whose operating results are regularly reviewed by the Banks’s seniors management team which is also the chief operating decision maker (CODM) to make decisions about
resources to be allocated to the segment and assess its performance
 For which discrete financial information is available.

5.22. Investment in associates and joint ventures

Investments in which the bank, together with one or more parties, has joint control of an arrangement set up to undertake an economic activity are classified as joint ventures. The group
classifies investments in entities over which it has significant influence, and that are neither subsidiaries nor joint ventures, as associates. Investments in associates are recognised using
the equity method for reporting under the NIBL Group. Under this method, such investments are initially stated at cost, including attributable goodwill, and are adjusted thereafter for the
post-acquisition change in the group’s share of net assets. Goodwill arises on the acquisition of interests in joint ventures and associates when the cost of investment exceeds the group’s
share of the net fair value of the associates or joint venture’s identifiable assets and liabilities.

An investment in an associate is tested for impairment when there is an indication that the investment may be impaired. Goodwill on acquisitions of interest in joint ventures and
associates is not tested separately for impairment.

Profits on transactions between the group and its associates and joint ventures are eliminated to the extent of the group’s interest in the respective associates or joint ventures. Losses
are also eliminated to the extent of the group’s interest in the associates or joint ventures unless the transaction provides evidence of an impairment of the asset transferred.

For standalone financial statement of the bank the investments in associates have been carried at cost.

6. Segmental Information
The bank is managed through central operation. All policies and operations are controlled and directed from the head office. NIBL operates in single jurisdictional area. The management
of the bank is on the basis of various types of operations supported by ancillary support services. Bank has identified banking operation (which includes basically deposit lending and cash
operation related activities), treasury function, trade finance business, card operation and remittance business as its major business segments. None of the segments have been identified
as a single cost centre. Therefore there is no inter-unit cost transfer mechanism within the bank.

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Interim Financial Statements 2019-20 (4th Quarter)

A. information about reportable segments

NPR in ‘000
Banking Operation Treasury Trade Finance Card Remittance Total

Corresponding
Current Quarter

Current Quarter

Current Quarter

Current Quarter

Current Quarter

Current Quarter

Previous Year
Corresponding

Corresponding

Corresponding

Corresponding

Corresponding
Previous Year

Previous Year

Previous Year

Previous Year

Previous Year

Quarter
Quarter

Quarter

Quarter

Quarter

Quarter
7Particulars
Revenues from external customers 5,365,505 5,790,636 1,463,960 1,423,055 1,043,047 1,261,722 164,969 202,466 18,908 23,090 8,056,389 8,700,970
Intersegment Revenues
Segment profit (loss) before tax 1,791,691 2,451,821 1,001,847 994,906 713,799 882,113 112,895 141,551 12,939 16,143 3,633,171 4,486,534
Segment assets 152,155,985 135,912,305 36,108,711 31,509,133 14,735,800 18,288,205 153,347 132,342 127 3 203,153,970 185,841,988
Segment liabilities 156,446,669 138,942,585 33,609,293 31,154,539 12,848,478 15,526,923 234,580 184,295 14,951 33,646 203,153,970 185,841,988

B. Reconciliation of reportable segment profit or loss

NPR in ‘000
Corresponding
Particulars Current Quarter
previous Year Quarter
Total profit before tax for reportable segment 3,633,171 4,486,534
Profit before tax for other segments - -
Elimination of inter-segment profit - -
Elimination of discontinued operation - -
Unallocated amounts: - -
Other corporate expenses - -
Profit before tax 3,633,171 4,486,534

7. Related Parties
7.1. Identification of Related Parties
Following has been identified as related parties for Nepal Investment Bank Limited under NAS 24 Related Parties
1. Directors of the Bank
2. Key Management Personnel of the Bank
3. Relatives of directors and key management personnel
4. Subsidiaries- NIBL Ace Capital Limited
5. Associate companies- Flexiterm Private Limited ,National Micro Finance Bittiya Sanstha Ltd and M Nepal Limited
6. NIBL Employee Retirement Fund

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Interim Financial Statements 2019-20 (4th Quarter)

7.2. Reporting date balances

Ashad-end Balance NPR

Board of Directors 99,731,269
Key Management Personnel 167,755,126
NIBL Ace Capital 23,571,972.04
M Nepal Limited 293,580
Flexiterm Private Ltd 13,444
NIBL Retirement Fund 634,291,944

7.3. Board of Directors

1.Mr. Prithivi B. Pande’ (Chairman)

2.Mr. Surya P. L. Shrestha
3.Mr. Prajanya Raj Bhandary
4.Mr. Bhuwaneshwor P. Shah
5.Mr. Niranjan Lal Shrestha
6.Mr. Kabi Kumar Tibrewala
7.Ms.Manju Basnett

7.4. Key Management Personnel

CEO Mr. Jyoti Prakash Pandey

DGMs Mr. Bijendra Suwal
Mr. Rabin Sijapati
AGMs Deepak Shrestha
Sachin Tibrewal
Sujata Joshi

8. Dividends Paid(aggregate or per share) separately for ordinary shares and other shares
The Bank has paid 8.5% cash dividend (NPR 1,093,928,674) for the fiscal year 2018-19 .

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

The bank has issued 13,792,054 number of bonus share including fraction share on equity share capital .

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Interim Financial Statements 2019-20 (4th Quarter)

10. Events after Interim Period

The Bank follows NAS 10 Events After Reporting Period for accounting and reporting of the events that occur after the reporting period. Bank classifies those events as adjusting and non-
adjusting. There are no material events both adjusting and non-adjusting for the reporting period.

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

There is no any merger or acquisition effecting the changes in the composition of the entity during the interim period ending on Ashad end, 2077.

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