Annual Report 2019 NMB Final.Indd

Contents

Chairman’s Statement...... 3

Directors Report...... 5

CEO’s Message...... 25

Financial Graphs ...... 27

Annual Financial Statements FY 2018-19

NMB Bank Ltd...... 33

Annual Financial Statements FY 2018-19

OM Development Bank Ltd...... 153

Notice about 24th Annual General Meeting...... 254

Chairman’s Statement

On behalf of the Board of Directors, I take this opportunity Despite the challenges, the Bank has managed to scale to express my sincere gratitude and warm welcome up its business and achieve good fi nancial results during to all the respected shareholders, invitees, offi cials, the review period. During the review year, the Bank’s media personnel, ladies and gentlemen to the 24th deposits increased to NPR 98.52 Billion while loans Annual General Meeting of NMB Bank Limited. I am and advances grew to NPR 91.89 Billion i.e. a growth of extremely delighted to welcome everyone here to this 16.58% in deposits and 21.47% in loans and advances gathering of shareholders aﬅ er the successful merger of as compared to previous year. The Bank has been able Om Development Bank Ltd. with NMB Bank Ltd. to record net profi t of NPR 2.26 Billion during the review year, a growth of 21.77% compared to the previous year. It is well-known that NMB Bank, with the intention This profi t was earned when the Bank’s paid-up capital of strengthening its existing capital base and market was only NPR 9.62 Billion. coverage completed the merger with Om Development Bank Ltd. that had a strong presence in Gandaki The agenda to distribute 21% bonus share and 14% Province and Province 3. The unifi ed banking operation cash dividend to the listed shareholders aﬅ er merger commenced from September 28, 2019. Aﬅ er the merger, from the reserve fund and distributable profi t of the the Bank’s paid-capital, deposits, loans and advances, fi scal year 2018/19 is placed for approval in the Annual and reserve fund reached NPR 11.53 Billion, NPR 123.57 General Meeting. The distributable profi t of former Om Billion, NPR 115.29 Billion and NPR 9.5 Billion respectively Development Bank amounting NPR 548.9 Million aﬅ er while its branches network and extension counters have regulatory adjustments as on Mid July 2019 and share reached 163 and 5 respectively as of Mid October 2019. swap surplus of NPR 603.6 Million has been accounted This historic merger was the result of hard-work and in the reserve fund of the Bank as on merger date. contribution of the directors, shareholders, and staff of both NMB Bank and erstwhile Om Development Bank, NMB Bank has always been at the forefront in along with the persistent support of regulatory bodies. accommodating the changes in the fi nancial markets. With their patronage, advice, suggestions, and prompt The Bank has been involved in various activities with decisions, we have succeeded in reaching this stage the aim of improving the fi nancial condition of the today. Therefore, on behalf of the Board of Directors, country by exploring potential opportunities in the I as the Chairman of NMB Bank Ltd. wish to extend fi nancial sectors in cooperation with the domestic and heartfelt thanks to all who have been instrumental in international organizations. Further, the Bank has also orchestrating the successful merger. been undertaking initiatives to enhance the capacity of its employees. The liquidity crisis prevailing in the overall banking sector did not worsen as anticipated during the review The Bank has expanded its investment in industrial and period. The management of deposit and loan interest agricultural sector that contributes towards employment rates remained challenging due to the higher proportion generation in the country to remain in line with the strategy of investments as compared to savings along with the of increasing credit investment in the productive sector. fl uctuations in liquidity from time to time. Although the The Bank has been off ering Women Entrepreneurship investment sector did not grow as expected due to slow Loan with an objective of empowering women interested growth in domestic industries, trade and productive to operate own business and be self-reliant. Likewise, sectors; the growth in remittance infl ows, increase the Bank has also been providing various loan facilities in agricultural production, ease of supply of energy, targeted at youths returning from foreign employment rapid development of construction works, expansion as part of government’s self-employment campaign. The of industrial production, and increase in tourist arrivals Bank has given priority to expanding loan investments in created a positive impact. small and medium enterprises to be in solidarity with the

NMB Annual Report-2018/19 3 Nepal Government’s policy of focusing on helping local On behalf of the Board of Directors, I would like to thank entrepreneurs, while keeping the economic prosperity Mr. Hari Babu Neupane, Director representing public of the local communities. With the plan to expand our shareholders from 15 February 2016 to 13 March 2019 investment in the priority sectors and support the overall for his invaluable contribution and guidance. I also development of the country, the Bank continues to work take this opportunity to welcome Ms. Sunity Shrestha on products to help raise the economic standard of the (Hada) and Mr. Ravi Shankar Sainju to the NMB Board. marginalized people. My sincere appreciation to the respected shareholders, regulatory bodies, media, customers, Board of Directors The Bank has achieved the goals pursuant to its vision and staff of the Bank for their invaluable support and 2020 and is continuously putting eff ort in moving ahead confi dence. keeping in line with its 5-year strategic plan for achieving sustainable business expansion and profi tability. We assure our commitment in achieving the goals and be one of the best banks of Nepal. Thank you.

The Bank has board representations from competent Pawan Kumar Golyan and strong institution like Employees Provident Fund, Chairman Nepal and international partnership with Netherland’s Date: 9 January, 2020 government supported Nederlandse Financierings- Maatschappij Voor Ontwikkelingslanden N.V. (FMO). We are grateful to FMO for their technical assistance and enhancement of capacity development.

4 www.nmbbanknepal.com Directors Report

Respected Shareholders,

On behalf of the Board of Directors, I extend my Lending: 0.32%, Term Loan: 23.75%, Overdraﬅ Loan: warm welcome and greetings to all the shareholders, 6.45%, Trust Receipt/Import Loan: 4.51%, Demand representatives of various regulatory authorities, and Working Capital Loan: 19.95%, Hire Purchase representatives of diff erent institutions, and all other Loan: 4.55% and Other Loans: 26.91%. Of the Bank’s stakeholders for your honorable presence in the 24th total loan investment, exposures in Hydropower and Annual General meeting of NMB Bank Limited. Renewable Energy, Agriculture, Small and Medium Enterprises, and Tourism sectors remained at Trust that you have already received the Annual Report 20.38%, 11.25%, 6.55%, and 3.89% respectively. The post-merger of NMB Bank Ltd. and Om Development share of risk assets portfolio in productive sector Bank Ltd. including separate Statement of Financial during the review period remained at 42.08%. The Positions, Statement of Comprehensive Income and Bank shall continue to increase credit investment in Statement of Cash Flow of both merged entities for the productive sector in the future as well. FY 2018/19. I now, with the permission of this revered Annual General Meeting, would like to present the Investment: The Bank increased its investment by directors report pursuant to the Company Act, 2006, 8.85% to take its total investment portfolio of NPR Clause 109 (4), comprising of the Bank’s fi nancial 10.02 Billion in the previous year to NPR 10.91 Billion progress, summary of the country’s economy, challenges during the fi scal year 2018/19. Out of total investment, faced by the banking industry, and the achievements of the Bank invested NPR 870 Million in organizations’ the Bank during the review period. shares, NPR 9.38 Billion in Nepal Government Bonds and Treasury Bills, and NPR 650 Million in Bonds of Foreign Banks. 1. Key Financial Performance for the Fiscal Year 2018/19 Operating Expense: During the fi scal year 2018/19, Other Operating Expenses reached NPR 885.5 Million Deposit Collection: During the fi scal year, the Bank’s i.e. an increment of 20.13% from NPR 737.1 Million in deposit grew by 16.58% from NPR 84.51 Billion to NPR the previous fi scal year. The staff expense (excluding 98.52 Billion in which the share of institution deposit bonus) during the review period increased by 43.25% remained at 39.59%. Of the Bank’s total deposit from NPR 736.4 Million to NPR 1.06 Billion. The portfolio during the review period, the composition increase in operating expense however, remained of current deposit, fi xed deposit, saving deposit, within the pre-approved budget. call deposit, and other deposit remained at 5.85%, 50.15%, 28.62%, 9.83%, and 5.55% respectively. The Income: The Total Operating Income of the Bank Bank has managed to mobilize institution deposit increased by 39.41% i.e. from NPR 4.10 Billion in the within the threshold as prescribed by Nepal Rastra previous fi scal year to NPR 5.72 Billion in the review Bank. year. During the review period, the Net Income increased from NPR 1.85 Billion to NPR 2.26 Billion. Loans and Advances: During the fi scal year, the The fi scal year 2018/19 characterized by the Net Bank grew its risk assets portfolio from NPR 75.65 Income growth of 21.77% witnessed an increase Billion to NPR 91.89 Billion thereby managing a of 26.96% in the Interest Income whereby the Bank growth of 21.47% as compared to FY 2017/18. During earned NPR 11.08 Billion as compared to NPR 8.73 the review period, the composition of loans remained Billion in the last fi scal year. Likewise, the Fees and as: Real Estate: 3.56%, Home Loan: 10.00%, Margin Commission earned from domestic and foreign

NMB Annual Report-2018/19 5 trade transaction increased by 26.35% compared Non-Performing Asset: Due to the management’s to previous fi scal year and stood at NPR 1 Billion. special eff orts and attention towards bad debt Foreign Exchange Income increased by 43.56% recovery, the Bank was able to reduce NPA to 0.82% and reached NPR 440.1 Million. The increase was at the end of the review period from 0.88% in the last possible due to the Bank’s investment in new sector fi nancial year. and services. Debentures: The Debentures of NPR 500 million Capital Fund, Credit Deposit, Base Rate and with interest rate of 7% p.a. issued by the Bank in Liquidity Ratio: The Bank maintained a sound fi scal year 2014/15 will mature on August 21, 2020. Capital Fund during the fi scal year, as a result of Likewise, the debenture of 10% p.a. interest rate has which the capital adequacy ratio remained at 15.43%; maturity on April 12, 2029. The Bank sets aside fund above the stipulated requirement of at least 11% by in Debenture Redemption Fund each year to pay NRB. Likewise, the Credit Deposit ratio was effi ciently the Debentures in which NPR 400 Million has been managed and remained at 76.88%. Liquidity ratio collected till date. also remained within the prescribed limit and stood at 28.28%. Base rate of the Bank at the end of review period was 9.86%.

The Bank’s key ﬁ nancial performance during the review period: (ﬁ gures in thousand)

Fiscal Year Fiscal Year Incremental Percentage SN Particulars 2018/19 2017/18 Volume change (%) 1 Total Deposit 98,516,667 84,507,136 14,009,531 16.58 2 Total Loans and Advances 91,886,955 75,645,917 16,241,038 21.47 Total Investment (Including 3 10,905,293 10,018,719 886,574 8.85 Subsdiaries) 4 Net Interest Income 4,244,021 2,904,014 1,340,007 46.14 Commission and Discount and 5 1,471,919 1,196,110 275,889 23.07 Other Operating Income 6 Foreign Exchange Income 440,062 306,532 133,530 43.56 7 Gross Operating Income 5,716,020 4,100,124 1,615,896 39.41 8 Gross Operating Expenses 885,455 737,089 148,366 20.13 9 Gross Proﬁ t 3,414,276 2,346,669 1,067,607 45.49 10 Net Proﬁ t 2,257,276 1,853,793 403,483 21.77 11 Paid Up Capital 9,618,163 7,603,291 2,014,872 26.50 12 Capital Adequacy Ratio (%) 15.43 15.75 -0.32 -2.05

Bank’s Jurisdiction and Branch Network: The Province 1 : 24 branches Bank during the review period provided banking Province 2 : 17 branches facilities and services to its customers through 110 Province 3 : 44 branches branches, 4 extension counters and 103 ATMs across Gandaki Province : 39 branches the country which aﬅ er the merger increased to 163 Province 5 : 29 branches branch oﬃ ces, 5 extension counters, and 129 ATMs. Karnali Province : 03 branches The number of branches located in each province are Sudur Paschim Province : 07 branches as follows:

6 www.nmbbanknepal.com In order to provide banking facilities at the doorstep 2. Impact of Domestic and World Economic Outlook of the people living in remote areas of the country, On Bank’s Performance the Bank has been providing branchless banking services in Rasuwa, Dolakha, Udayapur, Jhapa, Financial Status Review Taplejung, Ramechap, Morang, Kapilvastu, Sunsari, Nawalparasi, Bhaktapur, Kaski and Illam. The Bank • Where the world economy in 2018 grew at 3.6 intends to expand its branchless banking facilities in percent, the International Monetary Fund (IMF) other remote area in future as well. projects it to grow by only 3.2 percent in 2019

The Bank has entered into an agreement with various • In 2018, the economies of developed countries foreign banks and remittance companies to transfer grew by 2.2 percent, and the economies of the money of migrant workers to Nepal through its emerging and developing countries grew by 4.5 banking channel. The remittance transactions are percent. The IMF, for 2019 has projected a slow still carried out through our banking channel based growth in economies of developed countries, and on such agreements in the past years with the banks emerging and developing countries by 1.9 percent and remittance companies of India, Dubai, Malaysia, and 4.1 percent respectively. etc. allowing the Bank to form the basis of foreign currency deposits. The Bank is also reviewing the • China and India achieved an economic growth potential to expand remittance services in other rate of 6.6 percent and 6.8 percent respectively, countries. while in 2019 it is projected to grow by 6.2 percent and 7.0 percent respectively. Representative Offi ce outside Nepal and its progress: • International Monetary Fund projects the consumer price infl ation of developed, and The Representative offi ce established at Lebuh emerging and developing economies to remain at Pasarbesar in Kualalumpur, Malaysia has been 1.6 percent and 4.8 percent respectively in 2019. assisting as a point of contact for expansion of trade The consumer price infl ation in 2018 was 2.0 and remittance business. With this establishment, percent in advance economies, and 4.8 percent in the Representative offi ce has helped to foster the emerging and developing economies. growth of trade business between two countries and communicate the information on Nepalese economy • Economic growth has gained momentum and available fi nancial services to Nepalese people since 2016/17. The Central Bureau of Statistics in Malaysia. This offi ce has been playing pivotal preliminarily estimates country’s economic role to connect and garner the relationships with growth of 7.1 percent in FY 2018/19. The the Malaysian corporates and business houses economic growth is due to increase in agricultural and enhance trade businesses with other foreign production, ease of energy supply, intensifi cation establishments. of construction works, expansion of industrial production, and increase in tourist arrivals.

NMB Annual Report-2018/19 7 • In the FY 2018/19, the ratio of Gross Domestic • In the eleven months of the review period, Savings to Gross Domestic Product (GDP) is workers’ remittances increased 17.5 percent with estimated to have reached 20.5 percent while an infl ow of NPR 799.02 Billion. A modest growth Gross National Savings to GDP is estimated to be in remittance infl ow coupled with mounting trade at 52.4 percent. defi cit has resulted in an upsurge of current account defi cit. The overall balance of payments • During the review period, the ratio of Gross Fixed defi cit in eleven months of 2018/19 stood at NPR Capital formation to GDP is estimated to have 90.83 Billion. reached 36.9 percent. Such proportion of Gross Capital Formation is estimated to be 62.3 percent. • Considering the imports of eleven months of the review period, the banking sector has • Due to higher demand for investment than suffi cient foreign exchange reserve to sustain the savings, the ratio of resource gap to GDP is prospective import of goods for 8.8 months and expected to have remained 9.9 percent during the import of goods and services for 7.7 months. review year. • Nepalese currency vis-à-vis the US dollar • Average consumer price infl ation that stood at depreciated by 0.02 percent as of Mid-July 2019 4.2 percent in 2017/18 increased to 4.5 percent compared to Mid-July 2018. The buying rate per during eleven months of 2018/19. US dollar stood at NPR 109.36 as on fi scal year 2018/19 end that was NPR 109.34 during FY • According to preliminary Statement of Receipts 2017/18. and Payments released by the Financial Comptroller General Offi ce, the government (Source: Monetary Policy for 2019/20, NRB) made Recurrent Expenditure of NPR 714.98 Billion, Capital Expenditure of NPR 238.36 Billion, Despite the decline in the growth of global economy, and Financial Management Expenditure of NPR the projection of economic growth of neighboring 141.24 Billion. The government during the period China and India has been positive. International trade mobilized the revenue of NPR 859.60 Billion. in the region appears to be impacted as taxes and other disputes between major economies continue • In the year 2018/19, the government mobilized to prevail. Although decrease in market capitalization gross domestic debt of NPR 96.38 Billion and made growth in the securities market, foreign exchange a repayment of NPR 34.31 Billion. Accordingly, reserve and the investment fund have created the net domestic debt of the government stood at challenges in the banking sector, the increase in NPR 62.07 Billion during the period, which is 1.8 agricultural production, ease of supply of energy, percent of the GDP. intensifi cation of construction works, expansion of industrial production, and increase in tourist arrivals • Current account defi cit amounted to NPR 248.72 as indicated by Monetary Policy for higher economic Billion in eleven months of 2017/18. An escalation growth are likely to create positive impact to the in import compared to export raised the trade overall banking sector. defi cit by 17.2 percent than previous year to NPR 1,211.96 Billion.

8 www.nmbbanknepal.com 3. The Board of Directors’ opinion on the achievements of current ﬁ scal year and future plans:

Following are the main ﬁ nancial highlights of the Bank as on Mid October 2019 for the running ﬁ scal year:

SN Particulars NPR (in Thousand) 1 Total Deposit 123,565,057 2 Total Loan and Advances 115,297,262 3 Total Investment (Including Subsidiaries) 12,653,290 4 Net Interest Income 1,223,654 5 Commission, Discount and other Operating Income 379,839 6 Income from Foreign Exchange Transaction 136,624 7 Net Operating Income 1,603,493 8 Total Operating Expenses 635,427 9 Total Operating Income (Before Impairment) 1,603,493 10 Net Proﬁ t 815,136 11 Paid Up Capital 11,529,742 12 Reserves and Funds 9,500,421 13 Capital Adequacy Ratio 15.81%

Future Plans:

The Bank will continue to seek a balanced growth of Additional resources and authorities will be delegated to deposit and loan investments remaining in line with its provincial offi ces to ensure its eff ective functioning. strategy. With continuous improvisations in quality of the loans, the Bank will focus on increasing the size of The bond issuing process has been initiated with an credit investments in Agricultural, Retail, and Small and objective of capital formation to expand business, which Medium Enterprises (SME) sectors. Likewise, various will be completed within the stipulated timeframe as per loan facilities off ered by the Bank targeted at youths the Directive issued to Banks and Financial Institutions returning from foreign employment will be made more by Nepal Rastra Bank. eff ective so they could utilize their skills for the economic prosperity of the nation. The Bank will specially focus The Bank will intensify its eff ort to appoint remittance on increasing lending to productive sectors for which agents in diff erent countries and depute dedicated staff expansion of its branch networks in potential business for monitoring and increasing remittance transactions areas will be given a priority. through its channel by entering into agreements with remittance service providers. Existing technologies will be improved and updated as required to make the Bank technically effi cient for The Bank will pay special attention to increase the providing eff ective and accurate banking services to business size of the subsidiary companies. The process the customers. The Bank plans further investment in of issuing mutual funds with new investment plans will technology to minimize risks and provide maximum be accelerated for achieving its business growth. convenience to its customers.

NMB Annual Report-2018/19 9 The Bank will continue to contribute towards upliﬅ ment • Risk of increased competition and lack of skilled of community and protection of environment, and human resources. support country’s commitments towards sustainable development goals as part of its corporate social • Possible foreign exchange risks in foreign responsibilities. currency deals arising from ﬂ uctuations in exchange rates.

4. Industrial and Professional Relations: • The risks arising from the country’s political and other external reasons that has impact on On the foundation of transparency and imports and exports resulting in non-payment of professionalism, the Bank has developed an loans and interest. amiable and professional relationships with all its stakeholders. The Bank fi rmly believes that such • Possible risk of the fi xed interest rate in foreign relationships will be pivotal for its sustainable future loan that can be higher than the prevailing interest growth and success. rate in the market due to fl uctuations in interest rate, and possible risk of burden in repayment of loan in foreign currency due to exchange rate 5. Changes in the Board of Directors: fl uctuations.

In the review year, Director Hari Babu Neupane • Possible risks resulting from changes in resigned from the Board of Directors and his economic, monetary and fi nancial policies of the resignation was approved on 13 March 2019. Other nation. than that no changes were made in the Board of Directors during the review period. However, in the • Risks resulting from the sluggishness of the running fi scal year, Mr. Rabi Krishna Sainju and international economic and fi nancial sectors that Ms. Sunity Shrestha (Hada) were elected to fi ll the could have a ripple eff ect on the Nepalese market. vacant directorial positions from public shareholders category. • The likely impact on the source of income due to lack of alternative investment avenues and contraction in the domestic market. 6. Signifi cant Issues Aff ecting Business: • A lack of proper database and advance technology The major risks and challenges that holds the in the country to prevent money laundering. potential to signifi cantly impact the bank in future are detailed as below: 7. Signifi cant Observation in the Audit Report and • Risks inherent in the credit investments and non- Subsequent Response from the Board: funding based services provided by the Bank There is no observation mentioned in the Audit Report • The volatility in liquidity situation has brought that could signifi cantly aff ect the Bank’s business. challenges in the management of interest rates of both deposits and loans.

10 www.nmbbanknepal.com 8. Recommended Amount for Dividend Payment: 11. Major Changes made by the Company and its Subsidiaries Resulting to Signifi cant Changes in With the approval of Nepal Rastra Bank, the Bank the Company’s Business: has proposed the agenda in the Annual General Meeting with recommendation for distributing NMB Capital Ltd., a 100% subsidiary of NMB, has 35% Dividend (21% Stock Dividend amounting been acting as Share Registrar of the Bank, for the NPR 2,421,245,759 and 14% Cash Dividend service of which the subsidiary company was paid amounting NPR 1,614,163,839.11 - including Tax) NPR 762 Thousands in the review period. At the end on the Paid Up Capital of the Bank aﬅ er merger to of the review year, the bank account of NMB Capital be distributed from the distributable profi t of NMB Ltd. maintained at this bank had deposit of NPR Bank as on Mid July 2019 to all the shareholders 140.10 Million. NMB Capital was paid interest of NPR maintained on the date of book closure. The profi ts of 2.14 Million by the Bank in the fi scal year 2018/19. the merging entity Om Development Bank have been accounted in the Reserve Fund. An employee of the Bank has been appointed as the Chief Executive Offi cer of the subsidiary NMB Capital Ltd. The Bank received NPR 2.17 Million as building 9. Details of Shares Forfeited by the Bank: rent and NPR 2.4 Million as administrative and other services fee as per the agreement from NMB Capital. No shares were forfeited during the review year.

12. Information provided by the Basic Shareholders to 10. Performance of the Company and its Subsidiaries, the Bank: and Review of the Existing Status: During the review period, no information was The performance progress of the Bank is mentioned received other than the regular information to be in the ﬁ rst section whereas the performance of provided as per the prevailing law. its subsidiaries- namely NMB Capital and NMB Micro Finance are mentioned in section 25(b) of the Director’s report

NMB Annual Report-2018/19 11 13. Details of Share Ownership of the Directors and Oﬃ cials and the Information Received by the Company in relation to their share transactions during the review period:

In the review ﬁ scal year, none of the directors and oﬃ cials have been involved in the company’s stock trading. The details of their share ownership are listed below:

S.N. Name Designation Share Ownership 1. Mr. Pawan Kumar Golyan Chairman 1,103,054

Mr. Nico Klass Gerardus Pijl 2. Director - (representative from FMO, Netherlands)

Mr. Rajendra Kaﬂ e (representative from 3. Director - Employees Provident Fund)

4. Mr. Harischandra Subedi Director 1,858

5. Mr. Pradeep Raj Pandey Independent Director -

Mr. Nand Kishore Rathi (Alternate 6. Alternate Director 2,010,983 Director to Mr. Nico Klaas Gerardus Pijl)

7. Sunil K.C. Chief Executive Oﬃ cer 1,651

8. Pradeep Pradhan Chief Operating Oﬃ cer 22,165

9. Shabnam Limbu Joshi Chief Business and Support Oﬃ cer -

10. Sharad Tegi Tuladhar Chief Risk Oﬃ cer -

11. Govind Ghimire Chief Business Oﬃ cer -

12. Sudesh Upadhyaya Chief Business Oﬃ cer 3,795

Company Secretary and Chief Legal, 13. Pramod Kumar Dahal 264 Compliance and AML Oﬃ cer

14. Navin Manandhar Chief Business Oﬃ cer -

15. Roshan Regmi Head Operations -

14. Information on the Directors relatives’ involvement 16. Internal control system: in the Bank’s contracts: With utmost priority from the Board of Directors to Disclosure not required as there was no such safeguard the interest of the creditors, the internal agreement. control system of the Bank and its functioning have been made more eﬀ ective to ensure sound and safe operation by formulating necessary rules, 15. If the Bank has purchased its own shares, policies and procedures for inherent and potential mention the reason for such purchase, number of risk management. Abiding by the prevailing law purchased shares and amount paid by the Bank: and directive issued by Nepal Rastra Bank, four committees viz. Audit Committee, Risk Management None. Committee, Assets Laundering Prevention Committee, and Human Resources Service Committee have been formulated by the Board of

12 www.nmbbanknepal.com Directors. These committees discusses various Directors also annually reviews the approved and risks in detail and updates the same to the Board implemented Risk Management Framework to deal of Directors. For eff ective risk management and with underlying risks of special importance to the prevention, various activities are being carried out at Bank. the management level of the Bank by its Management Team Committee, Credit Risk Committee, Assets The Board of Directors has also been identifying the Liability Committee, Human Resources Recruitment risk appetite for the Bank and the extent to which Committee, Information Technology Committee, and it wants to bear the risk to determine the overall Corporate Governance Committee. risk strategy. The Baord has eff ectively managed the risks by categorizing them into assets risk, In addition, the Risk Management Department of operational risk, liquidity risk, market risk, interest the Bank, has independently undertaken the task of rate risk, foreign exchange risk, and other risks. eff ectively controlling and managing the risk along In addition to the management level committee, with the periodic review of the actions taken in the following committees have also been constituted at area of risk control. The department has signifi cantly the Board level for risk management and eff ective contributed to maintain the institutional governance internal control system of the Bank. at the Bank through meticulous monitoring of the activities to ensure full compliance of the prevailing law and directives issued by Nepal Rastra Bank. Committees formed at the level of Board of Directors

Eff ective internal controls are the foundation of safe Audit Committee Details related to it are mentioned in and sound banking therefore NMB Bank Ltd. has section 18 of this Director’s report designed and enforced system of operational and fi nancial internal control that safeguards bank’s resources, produce reliable fi nancial reports and Risk Management Committee: comply with rules and regulations of the country. Eff ective internal control also reduces errors/ A risk management committee under the coordination irregularities with timely reviews and mitigations. of a Non-Executive Director have been set up at the The business strategies and the important policies as Bank. The coordinator of the Audit Committee has approved by the Board of Directors have been adopted been appointed as a member of the Risk Management by the senior management for risk management Committee where Head of Compliance Department activities. The Bank has also been strengthening its and Chief Information Offi cer are the members and internal control system by providing various types Head of Risk Management Department is the Principal of trainings to its employees to eff ectively manage Member Secretary. The committee regularly assemble risks. for the meeting to discuss on the risks identifi ed by the management level risk committee, the immediate implications on the Bank’s strategy including capital fund, Risk Management: liquidity position, credit to deposit ratio, risk appetite, etc. due to major changes in the directives issued by Nepal For agile performance through proper risk Rastra Bank and the changes in monetary policy. In each management, the Bank has prepared and quarter, any potential risk in relation to the stress testing implemented a robust risk management framework is discussed and the information is submitted to the for identifi cation, measurement, monitoring, Board of Directors for review. In the review year, the Risk management, control and reporting of the potential Management Comittee held 19 meetings accounting risks that the organization has to face. The Board of total expenditure of NPR 440,000.

NMB Annual Report-2018/19 13 Human Resources (HR) Service Committee: The Audit Committee has been performing its functions complying with the instructions by Nepal Under the coordination of one Non-Executive Rastra Bank. Each report received from the auditor Director, HR Service Committee has been is discussed and reviewed in the Audit Committee constituted. The committee also consists of the Chief with necessary instructions for improvement. Executive Offi cer, and the Chief Information Offi cer The Audit Committee discusses and reviews each as members, and Chief Human Resources Offi cer report received by the Auditor to identify all the risk as the Member Secretary. Bylaws on the service areas and ensures that the risks are addressed provision of the employees, policies related to the before a periodic submission of the report to the employees and succession planning, employees’ Board of Directors. The Board is regularly receving salary allowance and organizational structure are suggestions from the Audit Committee. discussed in this committee. In the review year, the HR Service Comittee held 10 meetings accounting During the review year, the Audit Committee held 17 total expenditure of NPR 240,000. meetings to which its members excluding Member Secretary were remunerated an allowance of NPR Assets Laundering Prevention Committee: 12,000 each per meeting. The total expenditure for the meeting amounted to NPR 396,000. Assets Laundering Prevention Committee has been constituted with a Non-Executive Director, a member from the Board, and Chief AML as Member Secretary. 19. Details of any payments yet to be made to the The Committee has made special eff orts to oversee Directors, Chairman, Chief Executive Offi cer, and control the risks by ensuring that laws pertaining Basic Shareholders or their close relatives or to money laundering and prevailing directive issued their associated companies: by Nepal Rastra Bank are fully complied. None

17. Details of Total Management Expenditure of the last Fiscal Year: 20. Details of remuneration to the Directors, Chief Executive Offi cer and Senior Management Staff : During the review period, the employee expenses and offi ce operating expenses amounted NPR 1.94 Detailed in section 35 of additional disclosures. Billion.

21. Information of Undeclared Dividend by the 18. List of Audit Committee members, their shareholders: remuneration, allowances and facilities, details of the work done by the Committee and the details of Out of the total dividend distributed by the Bank upto 16 any suggestions made by the Committee: July 2019, NPR 5,128,793 remains unclaimed by the shareholders. Uncollected dividend of last ﬁ scal year Under the coordination of one Non-Executive until Mid July 2019 amounting NPR 138,950,026.78 Director, Audit Committee has been constituted with is with the share registrar NMB Capital Ltd. A notice an additional Non-Executive Directorr and Head to collect the dividends has been published in the of Internal Audit Department as Principal Member newspaper and in the Bank’s website. The undeclared Secretary as per the direction of Nepal Rastra Bank. dividends of the shareholders before FY 2011/12 Following are the Audit Committee members: have been deposited in the Investor Protection Fund. Mr. Harischandra Subedi - Coordinator Mr. Nico Klaas Gerardus Pijl - Member Mr. Ranjan Pandey - Member Secretary

14 www.nmbbanknepal.com 22. Details of Fixed Assets purchased/sold pursuant (B) Subsidiary Companies and its Progress to Clause 141 of the Company Act 2006: NMB Capital Ltd. During the review period there was no purchase/sale of ﬁ xed asset. NMB Capital Ltd.; established with a capital investment of NPR 200 Million is a wholly owned subsidiary company of the Bank. The company 23. Details of the transactions with related companies has been managing the process of issuing primary pursuant to Clause 175 of Company Act 2006: shares, further public oﬀ erings, and right shares of various companies along with other investment Detailed in section 11 of this report. plans and portfolio management targeted towards general public as well as institutional clients.

24. Any other information to be disclosed in the In the fi scal year 2018/19, the net profi t of the Director’s Report as per Company Act 2006 and company stood at NPR 52 million. prevailing law: The key achievements of the subsidiary company in Required information has been provided in the fi scal year 2018/19 are as follows: relevant section of this annual report. i. NMB Capital Ltd. continued the services of issuance and sales manager, share registrar, 25. Other Essential Information: guarantor and trustee during the review period. The company has established a strong (A) In relation to completion of merger infrastructure for providing shares dematerialization services to its customers. As decided by the Annual General Meeting to merge with other fi nancial institutions so as to develop the ii. NMB Capital has been working as a fund manager competitiveness and build a strong capital structure, and depository for Mutual Funds viz. ‘NMB Sulav the Bank successfully completed the merger with Fund 1’ and ‘NMB Hybrid Fund L-1’ issued by Om Development Bank Ltd. having stronghold in NMB Bank Ltd. With approval from Securities Gandaki province and started joint operation from Board of Nepal (SEBON), the company initiated 28th September 2019 in the name of NMB Bank. the issuance of mutual funds from 3rd week of Through this merger, the capital structure base of the October. Bank strengthened while its access to general public also increased with increased network presence in iii. The company has received an approval from Province 3 and Gandaki province. The merger also SEBON to provide institutional consulting signifi cantly increased the business portfolio of the services. Bank.

NMB Annual Report-2018/19 15 NMB Capital Limited STATEMENT OF FINANCIAL POSITION As at 16 July 2019

16 July 2019 (NPR) 16 July 2018 (NPR)

Assets Cash and Cash Equivalents 515,316,772.21 396,328,814.76

Investment Securities measured at Fair Value through P/L - -

Investment in Equity measured at Fair Value through OCI 11,000,000.00 11,000,000.00

Investment Securities measured at Amortized Cost 179,330,362.81 236,921,486.09

Other Financial Assets 22,647,325.74 25,443,281.13

Other Assets - -

Property & Equipment 13,170,943.64 13,714,772.84

Intangible Assets 965,607.60 488,701.60

Current Tax Assets 210,498.74 608,895.73

Deferred Tax Assets 4,124,439.53 2,172,844.31

Total Assets 746,765,950.27 686,678,796.46

Liabilities Dues to Public 408,253,956.99 356,938,883.14

Other Financial Liabilities 29,767,579.95 36,962,761.71

Other Liabilities 14,784,347.23 17,038,603.71

Current Tax Liabilities - -

Deferred Tax Liabilities - -

Other Provisions 8,697,354.00 5,163,588.00

Total Liabilities 461,503,238.17 416,103,836.56

Equity Share Capital 200,000,000.00 200,000,000.00

Retained Earnings 82,537,798.28 68,619,502.20

Other Reserves 2,724,913.83 1,955,457.70

Total Equity 285,262,712.10 270,574,959.90

Total Liabilities and Equity 746,765,950.27 686,678,796.46

16 www.nmbbanknepal.com NMB Capital Limited STATEMENT OF PROFIT OR LOSS As at 16 July 2019

16 July 2019 (NPR) 16 July 2018 (NPR)

Income Income from Merchant Banking Activities 25,479,619.89 36,371,046.98

Income from Mutual Fund operations 39,598,000.01 42,565,592.64

Interest Income 3,478,070.94 16,509,927.77

Other Income 50,045,221.81 40,412,404.36

Net gain/(loss) on ﬁ nancial investments Held for Trading - -

Total Income 118,600,912.65 135,858,971.75

Expense Personnel Expense 26,800,562.56 28,285,411.60

Interest Expense - -

Depreciation on Property and Equipment 3,865,552.41 3,421,950.29

Amortization of Intangible Assets 254,995.00 194,901.61

Other Operating Expenses 15,486,605.20 20,409,526.55

Total Expenses 46,407,715.17 52,311,790.05

Proﬁ t Before Tax from Continuing Operations 72,193,197.48 83,547,181.70 Income Tax Expenses 21,657,959.24 20,472,939.27

Deferred Tax Expenses/(Income) 1,492,795.32 -

Proﬁ t For the Year 52,028,033.56 63,074,242.43

NMB Annual Report-2018/19 17 NMB Laghubitta Bittya Sanstha Ltd.

NMB Laghubitta Bittya Sanstha Ltd is a subsidiary microﬁ nance company of NMB Bank. It has a paid-up capital of NPR 162 Million of which NMB Bank, other individual promoters, and general public have share ownerships of 51%, 19%, and 30% respectively. The head oﬃ ce of the company is in Pokhara Metropolitan City Ward No 25, Milanchowk, Hemja, Kaski. It has 100 branches spread in 54 hilly districts of the country.

The microﬁ nance institution has been providing ﬁ nancial services such as savings, loans, insurance to a large number of people living in remote mountainous and hilly regions of the country. The company in cooperation with various organizations have been encouraging and facilitating social works at the local level. The company as on 16 November 2019 had provided loan of NPR 3,3 Billion and mobilized deposit of NPR 1.2 Billion.

The highlights of NMB Microﬁ nance during the ﬁ scal year 2018/19 are as follows:

i. The paid-up capital of the ﬁ nancial institution as on 16th July 2019 is NPR 162 Million. As approved by the 6th Annual General Meeting, its issued and paid-up capital aﬅ er issuance of 12% bonus share and 1:1.5 ratio right share will reach NPR 453.6 Million.

ii. The subsidiary company opened 16 branches during the ﬁ scal year 2018/19 totaling its branches count to 100

iii. The company in partnership with Sakchyam- Access to Finance and AVSAR Project has been working to provide ﬁ nancial services in remote areas with poor ﬁ nancial access.

iv. The company has conducted various renewable energy promotion programs in collaboration with Winrock International and Arc Finance, ﬁ nanced renewable energy loan to deprived communities for purchasing solar panels, and solar lights for households in partnership with various vendor companies under Renewable Energy Project, and provided renewable energy related trainings to employees and customers.

18 www.nmbbanknepal.com NMB Microﬁ nance Bittiya Sanstha Limited Balance Sheet As at 16 July 2019 FY 2018/19 (NPR) FY 2017/18 (NPR) Capital & Liabilities 1. Share Capital 210,608,125 162,006,250 2. Reserve and Funds 95,577,936 86,693,563 3. Debentures and Bonds - - 4. Borrowings 1,960,240,209 1,682,081,898 5. Deposits 1,082,721,395 696,528,653 6. Proposed Dividend 2,557,993 1,112,171 7. Income Tax Liabilities 2,671,717 242,787 8. Other Liabilities 65,025,009 45,927,871 Total Liabilities 3,419,402,385 2,674,593,192 Assets 1. Cash Balance 130,155 16,451 2. Balance with Nepal Rastra Bank 16,030,000 24,230,000 3. Balance with Banks/Financial Institutions 284,303,949 447,869,961 4. Money at Call and Short Notice - - 5. Investments 2,000,000 2,000,000 6. Loans, Advances and Bills Purchased 3,077,263,360 2,167,490,812 7. Fixed Assets 25,806,730 21,177,981 8. Non-Banking Assets - - 9. Other Assets 13,868,191 11,807,986 Total Assets 3,419,402,385 2,674,593,192

NMB Annual Report-2018/19 19 NMB Microfi nance BittiyaSanstha Limited Profi t and Loss Account As at 16 July 2019 FY 2018/19 (NPR) FY 2017/18 (NPR) Particulars Interest Income 468,569,376 377,058,891 Interest Expenses 261,092,922 211,444,355 Net Interest Income 207,476,454 165,614,536 Commission ,Discount and other operating income 92,841,611 66,225,063 Exchange Fluctuation Income - - Total Operating Income 300,318,066 231,839,598 Staff Expenses 136,286,290 106,105,546 Other Operating Expenses 59,582,692 46,946,473 Exchange Fluctuation Loss - - Operating Profi t Before Provision for Possible Loss 104,449,084 78,787,580 Provision for Possible Losses 102,326,706 71,078,781 Operating Profi t 2,122,378 7,708,798 Non-operating Income/Loss 938,877 486,423 Loss Provision Written-Back 92,544,258 43,475,339 Profi t from Regular Operations 95,605,514 51,670,561 Profi t/Loss from extra-ordinary activities - - Net Profi t a er considering all activities 95,605,514 51,670,561 Staff Bonus Provision 9,560,551 4,697,324 Provision for Income Tax Provision 26,000,241 14,266,825 Current Year’s Tax Provision 27,671,717 15,253,262 Previous Year’s Tax Provision (44,941) - Current Year Deferred Tax (Income)/Expenses (1,626,535) (986,437) Net Profi t/Loss 60,044,721 32,706,412

20 www.nmbbanknepal.com (C) Corporate Social Responsibility

The Bank as part of its corporate social responsibility continued to support various social and environmental causes that would support the country’s commitment towards achieving UN’s sustainable development goals 2016-2030. The Bank during the review period organized Financial Literacy Programs in various places to aware the people on fi nancial services and support Nepal Government’s vision of fi nancial inclusion of all its citizens. The Bank inaugurated its joint operation aﬅ er the merger of Om Development Bank Ltd. by donating NPR 200,000 as fi nancial support to Apangata Maitri Samaj-a disabled-friendly social organization based in Pokhara.

The Bank has fully supported Pukar Apanga Asakta Samaj (Pukar Disability Social Service) in constructing a residential building for housing diﬀ erently-abled children in ward number 8, Kankai Municipality, Jhapa.

The Bank as in previous years reiterated its commitment towards cultural and historical heritage site preservation, and organized a nation-wide NMB Heritage Walkathon event to raise awareness and fund for the conservation and restoration of such heritage sites in the country. The Bank has spread the CSR activities across the country through its branches and state oﬃ ces and even to the places where the Bank does not have physical presence.

The Bank on the occasion of its anniversary organized various social activities such as distribution of educational materials to poor students, operation of health camps, plantation, etc. across the country through its branch network. The Bank to support literacy in rural areas has been distributing useful books collected from staﬀ , customers, and others.

(D) Human Resources:

The Bank considering the needs of committed and productive staff for the successful implementation of future plans and its overall growth has paid special attention to the development and management of its employees. The Bank believes that empowered employees are the source of happy customers and has made considerable investment in its staff capacity development and eff ective management through various internal and external training programs. During the review period, most of the employees received internal training while 382 employees received external training. 76 employees participated in trainings and seminars outside the country.

In the review year, the number of committed employees was 1120 that increased to 1523 aﬅ er merger of which 623 are females and 900 are male employees. At present, there are 9 employees completing more than 15 years of service period, 136 employees with more than 10 years of service, and 339 employees having worked for more than 5 years in the Bank.

(E) Arrangements for Grievance Handling:

Mr. Sudesh Upadhyaya, Chief Business and Strategy Offi cer who is also a member of the Bank’s management team has been appointed as Grievance Handling Offi cer for hearing grievances of customers and the general public. Also, an online portal has been created on the Bank’s website for grievance handling. In the review year, the Bank received 423 complaints and grievances through its branch offi ces, head offi ce, hotline, and call center. All the grievances other than those related to loan recovery that follows legal procedures have been resolved in time.

NMB Annual Report-2018/19 21 (F) Board of Directors Meeting and Conduct:

The meeting of Board of Directors has been held regularly as per the existing acts and policies. During the review period, 27 board meetings were held to which the Chairman of the Board was remunerated NPR 13,000 and other board members were remunerated NPR 12,000 each per meeting.

All the Board oﬃ cials have been complying the conducts mentioned in Section 6(1) of Uniﬁ ed Directive 2075.

(G) Management Team:

Mr. Sunil KC has been leading the Bank and its Management Team as the Chief Executive Oﬃ cer. With a banking experience of 28 years, he has been with NMB Bank for over a decade and was the deputy CEO before taking up his new role in the year 2017. Under his leadership during the review period, the Management Team consisted of the following staﬀ members:

Pradeep Pradhan Chief Operating Offi cer Shabnam Limbu Joshi Chief Business and Support Offi cer Sharad Tegi Tuladhar Chief Risk Offi cer Sudesh Upadhyaya Chief Business Offi cer Govind Ghimire Chief Business Offi cer Navin Manandhar Chief Business Offi cer Pramod Dahal Company Secretary and Chief Legal, Compliance and AML Offi cer Roshan Regmi Head Operations

Acknowledgement:

On behalf of the Board of Directors, I would like to express my sincere gratitude to all esteemed shareholders, representatives from various regulatory bodies, stakeholders, customers, Management team and the entire staﬀ for supporting the Bank to achieve remarkable ﬁ nancial results and reach new milestones year aﬅ er year.

Thank You.

Pawan Kumar Golyan Chairman Date: 9 January, 2020

22 www.nmbbanknepal.com FY 2018/19 Annex-15 of Securities Registration and Issue Regulation, 2016 (Details related to clause 26.2)

1. Director’s Report: Director’s report is included in the annual report of FY 2018/19.

2. Auditor’s Report: Auditor’s report is included in the annual report of FY 2018/19.

3. Audited Financial Statements: Audited ﬁ nancial statements are included in the annual report of FY 2018/19.

4. State of Legal Proceedings:

i) If any lawsuit has been ﬁ led by or against the organization within the quarterly period: 45 lawsuits related to debt collection and banking property were being reviewed in various courts during the last ﬁ nancial year,

ii) If any lawsuit was ﬁ led by or against the founder or director of the organization for disobeying the prevailing rules or committing a criminal oﬀ ense: Not in the information of this Bank.

iii) If any lawsuit has been fi le against founder or director for fi nancial off ence: Not in the information of this Bank.

5. Analysis of organization’s share transactions and progress:

i) Management’s perception regarding the trading of organization’s shares in the securities market: The ﬂ uctuations in share trading are determined by the open market and are in line with the values and norms of the same

ii) The maximum, minimum and ﬁ nal value of the Bank’s shares in each quarter of the previous ﬁ nancial year as well as the total number and days of transactions.

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Maximum Value 380 398 364 400

Minimum Value 303 315 300 356

Last Value 377 392 356 396

Number of Transactions 9,347 10,049 7,514 6,250

Days of Transactions 62 60 60 23

NMB Annual Report-2018/19 23 6. Problems and Challenges:

i) Internal Problems and Challenges: Problems in the management of deposits and loan interest rates due to ﬂ uctuations in liquidity, lack of skilled human resources in the banking sector, the challenge of managing operating risks along with an increase in transactions are considered as internal problems and challenges by the Bank.

ii) External Problems and Challenges: Continuing disputes including taxation among countries with larger economies aﬀ ecting international trade in the region, lack of investment in alternative sectors for expansion of business as compared to capital growth, imbalance in demand for credit and deposit growth, increasing unhealthy competition in banking sector are taken as external problems and challenges by the Bank.

iii) Strategies Adopted by Management: Deposits and credit investments are gradually increased as per Bank’s strategy. The Bank is focused to increase retail loan, agriculture loan, and small and micro-enterprise loan whereas continuously improving the quality of its risk assets portfolio. In addition, the Bank has paid special attention to increasing investment in the productive sector of the country for which priority shall be given to branches expansion in places with high business potential. The Bank has placed emphasis on new areas of income generation and mobilization of deposits, management of passive debts and diversifying risk assets, and use of Finacle Core Banking Soﬅ ware to make the core banking system timely and relevant. The Bank also has made various eﬀ ective training arrangements to make its skilled human resources more robust and eﬃ cient.

7. Corporate Governance

Details on the steps taken by the management of the Bank for the promotion of corporate governance: i) The policies adopted by the Board of Directors have been implemented. ii) Various committees formed at the management level (such as Assets and Liability Committee, Human Resources Recruitment Committee, Debt-Risk Management Committee, Corporate Governance Committee, etc.) are active. iii) In order to organize internal control mechanism, the Audit Committee has been meeting regularly to review and implement the suggestions given by the internal auditors in the regular audit report. iv) The Risk Management Committee has been meeting regularly to discuss the issues such as stress testing, adequacy of policies and rules, operational risk, etc. and following the instructions received for management. v) Discussions are being held from time to time by the Assets Laundering Prevention Committee emphasizing on customer identifi cation process and issues related to this area. vi) Various internal policies, rules and guidelines have been formulated and implemented to manage banking transactions and minimize operational risks. vii) Full compliance of the directives and guidelines on good governance issued by the regulator bodies including Nepal Rastra Bank, Securities Board, and Company Registrar’s Offi ce. viii) In order to maintain good governance within the Bank, a Corporate Governance Committee has been constituted and the decisions of the governance issues discussed in the meeting have been implemented. The Chief Executive offi cer has been given the responsibility for maintaining Corporate Governance in the Bank.

24 www.nmbbanknepal.com CEO’s Message

I am privileged to report that the Fiscal Year 2018/19 proved to be yet another remarkable year for NMB Bank. The achievements and the accolades that the Bank received during the period has emboldened our vision to become the most preferred Bank in Nepal. Our persistent eﬀ ort towards sustainable growth and untiring approach for the quality and transparency in business was recognized with the prestigious South Asian Federation of Accountants (SAFA) award for “Corporate Governance Disclosures” reaﬃ rming our commitment towards good governance.

The successful merger of Om Development Bank Ltd. (ODBL); one of the top-ranked development banks in the country, has enabled NMB to strengthen its foothold in the market and continue to serve a larger population base within a much wider geographical coverage. With the merger of ODBL, NMB by far has the largest network presence in Gandaki province.

The economy has been growing consistently by over 6% for third consecutive year and it is projected that this growth shall continue with an overall positive macroeconomic scenario in the future as well. In the backdrop of this positive economy, we see endless possibilities in the country to live up to the expectation of becoming a middle-income nation by the year 2030. The stable government and its gradual liberalization of policies has improved the country’s position in the doing business index with signiﬁ cant improvement in access to credit information, and commercial judicial system amongst others along with the reduction of cost and time for cross-border trading. This has created a conducive environment for business sectors and opportunity for direct foreign investments, while also providing opportunities for Banks to expand its trade related services.

Whilst the country’s macroeconomic indicators look positive on many fronts, the banking industry is frequently overshadowed by volatility in liquidity resulting to a mismatch in deposit mobilization and credit demand, thus creating a funding gap in the market. This variability in ﬁ nancial market is also attributed by the insuﬃ cient internal resources and/or lack of optimum resource utilization per se.

Riding on the wave of growing economy, the Bank has been able to expand its business and achieve desired outcomes in terms of both fi nancial and non-fi nancial growth as we continue to seek sustainability and responsible banking practices in all our internal and external endeavors. Aligning with country’s vision of self-reliant Nepal and achieving all sustainable development goals, the Bank has prioritized and focused its investments towards the upliﬅ ment of productive and real economy sectors. We believe that our commitment is not just towards the profi t but also towards the sustainability of the backbone of the real economy including Agriculture, Energy, Tourism, and Education.

The Bank over the years has become successful in setting benchmarks in the industry and remain distinct over its competitors. As a joint venture of FMO Netherland and the sole member bank of Global Alliance for Banking on Values (GABV) in Nepal, NMB is the ﬁ rst and only Bank in the industry to bring in foreign debt from renowned international groups including International Finance Corporation (IFC) and CDC Group Plc. With its association to such international investment groups, NMB as of date is the most sought aﬅ er names amongst foreign investors seeking for an investment opportunity based upon sustainability in Nepal. NMB closed the largest ever loan syndication of a cement manufacturing company in the country amounting NPR 16 Billion as a lead Bank

The dynamic business environment and rise of Fintechs and Telecom services in ﬁ nancial sectors has been changing the way of doing business for Nepalese Banks forcing them to adopt digital technologies at much faster pace than ever before in all its functions for eﬀ ective tendering of varying and innovative services to its customers. The Bank understands that digital engagement with its customers is imperative for its future growth and has made substantial

NMB Annual Report-2018/19 25 investment for digitization of its banking products and processes shortening the service turnaround time for customers and other stakeholders. In this age of information and process of digitization, the Bank has also made sizeable investment in information security to maintain confi dentiality and integrity of all its stakeholders. Guided by the principles of Value-Based Banking in all its processes, NMB is the fi rst and only Bank in Nepal to achieve ISO/IEC 27001:2013 Certifi cation for Information and Security Management making itself the most progressive Bank moving towards customer centricity.

Amidst the market opportunities and prevailing challenges, we believe that the banking industry has lot more to deliver and grow. However, the growth will also incorporate the merger and acquisition of fi nancial institutions as the consolidation in industry is inevitable. The increase in compliance and other regulatory costs with ever-growing challenge and need to tackle risks of money laundering and terrorism fi nancing are also expected to push fi nancial institutions towards consolidation. The digitalization of the services coupled with customers’ growing service expectations will change the way of doing business. Understanding the unavoidable changes manifested by a paradigm shiﬅ in doing business and critically analyzing each behavioral change, NMB is all poised to set the standards and seize every opportunity in the market.

I humbly believe that our year-on-year success is the key-result of all the hard works, patience and determination exerted by our staﬀ who together truly forms the most dynamic and energetic team force. I would like to extend my sincere gratitude to FMO for its unprecedented support in SME and digitization eﬀ orts. I also take this opportunity to personally extend my heartfelt thanks to our Chairman Mr. Pawan Kumar Golyan and all board members for their relentless guidance in making NMB one of the best commercial banks of the country. Finally, my sincere thanks to the esteemed shareholders, Nepal Rastra Bank, Ministry of Finance, partner organizations, SEBON, and all other regulatory bodies for their invaluable suggestions to our continuous improvement and business growth. With your constant trust and solidarity, we aspire to grow collectively for many years into the future.

Thank you

Sunil KC Chief Executive Oﬃ cer

26 www.nmbbanknepal.com Financial Graphs

Assets and Growth Comparison Efficiency Ratios 160 100% 3.00 90% 140 2.50 80% 120 2.00 70%

100 60% % 1.50 80 50% 1.00

60 40% Growth % 0.50 30% - Volume Volume in NPR bilion 40 20% FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 20 10% Fiscal Year 0 0% FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Exchange Gain/Total Assets Fiscal Year Net Profit/Loan and Advances Net Profit/Total Assets Total Assets NMB Growth Percentage of Total Assets Total Operating Expenses/Total Assets Industry growth percentage of total assets

Percentage growth of Deposit Volume Percentage Growth of Loan Volume 90% 120% 80% 100% 70% 60% 80% 50% 60% 40% 30% 40% 20% 20% 10% 0% 0% FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19

INDUSTRY growth percentage of total deposits INDUSTRY growth percentage of total Risk Assets Growth Percentage of Total Deposit of NMB Growth percentage of Total Risk Assets of NMB

Province-wise Loan and Deposit Volume

75 State-wise Total Deposit (FY '18-19) 80 57 70 State-wise Total Loan (FY '18-19) 60 50 40 30 13 10 6 20 2 2 Volume in billion 8 10 1 10 2 2 1 1 0 State 1 State 2 State 3 State 4 State 5 State 6 State 7

Province

NMB Annual Report-2018/19 27 DEPOSIT MIX FY 2017-18 DEPOSIT MIX FY 2018-19

Savings 16% Savings 13% 24% 6% 6% 30% Fixed Fixed

Current Current 55% Other deposits 51% Other deposits

LOAN MIX FY '17/18 LOAN MIX FY '18/19

Corporate & mid- 6% Corporate & Mid- 6% corporate corporate 18% SME/MSME/MF/Agri SME/MSME/MF/Agri 17% 33% 42% Retail Retail

Others Others 34% 43%

Total Operating Income and Net Profit Trend of NII, Fees and Commission 8,000 5,000 6,000 4,000 3,000 4,000 2,000 2,000 NPR million NPR million 1,000 0 0 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Fiscal Year Fiscal Year

Total Operating Income Net Profit After Tax Net Interest Income Fees and Commission

Industry vs NMB growth percent of net profit Loan Volume and Account Count 150% 100 30 80 100% 60 20 40 10 50% 20 0 0 0% NPR BILLION

Growth Percentage FY 2014- FY 2015- FY 2016- FY 2017- FY 2018- FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19

15 16 17 18 19 CUSTOMER IN '000 Fiscal Year FISCAL YEAR INDUSTRY growth percentage of Net Profit Growth percentage of net profit of NMB Total Risk Assets Number of Loan Account

28 www.nmbbanknepal.com Staff cost analysis

FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19

70% 62% 58% 60% 57% 49% 50% 55% 39% 40% 35% 34% 34%

30% 35%

20%

10%

0% Staff Expenses/Total Operating Expenses Staff Bonus/Total Staff Expenses

Deposit Volume and Account Count 120 1,000 100 800 80 600 60 400 40 20 200 NPR BILLION 0 0 CUSTOMER IN '000 FY 2014- FY 2015- FY 2016- FY 2017- FY 2018- 15 16 17 18 19 FISCAL YEAR

Total Deposits Number of Deposit Account

Staff Number and Cost 1,200 1,200

1,000 1,000

800 800

600 600

400 400 Number

Volume Volume NPR million 200 200

0 - FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Fiscal Year

Staff Bonus Total Staff Expenses Number of Staff

NMB Annual Report-2018/19 29 Market value per share and ratios 40.00 1000 30.00 800 600 20.00

400 NPR 10.00

Per Share 200 - 0 FY 2014- FY 2015- FY 2016- FY 2017- FY 2018- 15 16 17 18 19 Fiscal Year

Market value per share Earning per Share Dividend per share Price Earning Ratio

Shareholder's Fund, Dividend and ROE

Shareholder's Fund Total Dividend % Average Return on Equity %

20,000 40% 18,000 35% 16,000 30% 14,000 12,000 25% 10,000 20% 8,000 15% Percentage NPR in Mio. 6,000 10% 4,000 2,000 5% 0 0% FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19

30 www.nmbbanknepal.com Base Rate, Yield and Cost Trend 12%

10%

Percentage 4%

0% FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Fiscal Year

Base Rate Weighted Average yield Weighted Average cost of fund Weighted Average Interest Spread

Interest Income and Interest Cost

12.00 10.78 11.17

10.00 9.26 7.86 7.16 8.00 6.76 6.58

% 6.00 4.71 3.63 4.00 3.08

2.00

- FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19

Interest Income/Loan & Advances Interest Expenses on Total Deposit and Borrowing

Financial Health 100 18 16 80 14 12 60 10

8 Ratio 40 6 Percentage 20 4 2 0 0 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Fiscal Year

CD Ratio Total Capital Adequacy Ratio Liquidity (CRR) Non-performing credit/Total credit

NMB Annual Report-2018/19 31 32 www.nmbbanknepal.com Annual Financial Statements FY 2018-19 NMB Bank Ltd.

NMB Annual Report-2018/19 33 34 www.nmbbanknepal.com NMB Annual Report-2018/19 35 ------216.88 60,418,156 59,774,627 22,054,209 66,869,011 660,071,641 517,547,945 276,407,171 321,720,000 248,552,000 (Amount in NPR) 1,036,268,951 7,477,483,892 1,405,999,800 7,603,290,634 4,061,366,586 2,339,181,597 2,485,970,484 7,506,751,485 2,497,567,769 5,180,404,105 7,260,194,560 9,448,446,725 1,559,569,574 4,458,383,903 83,970,867,219 72,711,771,766 95,128,657,604 16,489,809,301 16,489,809,301 84,803,180,879 111,618,466,905 111,618,466,905 As at 32 Ashad 2075 As at 32 Ashad 2075 NMB ------180.94 35,578,570 70,040,593 624,364,996 340,390,000 248,552,000 102,915,862 115,408,800 3,203,523,072 8,458,374,429 3,468,060,000 2,239,236,412 2,145,955,868 9,618,162,652 2,512,798,517 1,780,326,613 3,491,726,477 2,172,967,239 8,595,482,282 3,317,961,987 8,096,354,503 1,577,898,704 1,201,873,611 97,892,301,967 88,485,031,394 10,829,181,584 10,316,351,016 17,403,014,259 17,403,014,259 88,270,353,369 118,067,395,314 135,470,409,573 135,470,409,573 As at 31 Ashad 2076 As at 31 Ashad 2076 - - - - 73,556 218.98 5,871,843 60,051,484 59,774,627 22,643,811 69,938,833 660,071,641 517,547,945 321,720,000 276,407,171 131,480,054 7,477,483,892 1,036,268,951 1,182,081,898 1,871,616,566 7,603,290,634 4,066,854,498 2,476,497,798 2,502,931,208 7,506,751,485 2,497,567,769 5,956,726,206 6,864,740,937 9,608,368,211 1,594,345,849 4,909,055,046 84,509,502,746 74,413,584,770 16,649,574,138 16,781,054,193 84,803,180,879 97,320,570,522 114,101,624,715 114,101,624,715 As at 32 Ashad 2075 As at 32 Ashad 2075 Group - - - - 183.11 224,219 8,605,751 38,039,788 74,165,032 624,364,996 340,390,000 102,915,862 116,673,171 165,396,616 3,203,523,072 8,458,374,429 4,828,300,209 2,675,953,373 2,239,236,412 9,618,162,652 2,512,798,517 1,961,722,547 3,519,188,757 8,595,482,282 3,317,961,987 8,801,746,664 2,172,967,239 1,616,577,616 1,229,893,858 98,830,664,647 91,011,889,312 10,845,211,584 10,458,681,378 17,611,872,473 17,777,269,089 88,270,903,369 120,907,286,896 138,684,555,985 138,684,555,985 As at 31 Ashad 2076 As at 31 Ashad 2076 4.9 4.4 4.5 4.6 4.7 4.1 4.2 4.3 4.8 4.9 4.18 4.19 4.20 4.17 4.21 4.22 4.15 4.25 4.23 4.24 4.26 4.27 4.28 4.11 4.10 4.12 4.13 4.14 4.15 4.16 Note Note Due to Nepal Rastra Bank Due to Nepal Rastra nancial instruments fi Derivative customers Deposits from Liabilities Instituions Due to Bank and Financial Borrowing Current Tax Liabilities Tax Current Provisions Deferred tax liabilities Deferred Liabilities Subordinated Other liabilities Debt securities issued liabilities Total Equity capital Share premium Share Retained earnings Reserves equity attributable to holders Total interest Non-controlling equity Total liabilities and equity Total Contingent liabilities and commitment per share Net Assets Value Derivative fi nancial instruments fi Derivative assets Other trading Loan and advances to B/FIs Loans and advances to customers Particulars Assets Cash and cash equivalent Bank Nepal Rastra Due from Institutions Placement with Bank and Financial securities Investment tax assets Current in associates Investment Investment in susidiaries Investment property Investment Property and equipment Property Goodwill and Intangible assets Deferred tax assets Deferred Other assets Assets Total Consolidated Statement of Financial Position Consolidated Statement of Financial As at 31 Ashad, 2076 (16 July, 2019)

36 www.nmbbanknepal.com ------216.88 60,418,156 59,774,627 22,054,209 66,869,011 660,071,641 517,547,945 276,407,171 321,720,000 248,552,000 (Amount in NPR) 1,036,268,951 7,477,483,892 1,405,999,800 7,603,290,634 4,061,366,586 2,339,181,597 2,485,970,484 7,506,751,485 2,497,567,769 5,180,404,105 7,260,194,560 9,448,446,725 1,559,569,574 4,458,383,903 83,970,867,219 72,711,771,766 95,128,657,604 16,489,809,301 16,489,809,301 84,803,180,879 111,618,466,905 111,618,466,905 As at 32 Ashad 2075 As at 32 Ashad 2075 NMB ------As per our attached report of even date of even As per our attached report 180.94 35,578,570 70,040,593 624,364,996 340,390,000 248,552,000 102,915,862 115,408,800 3,203,523,072 8,458,374,429 3,468,060,000 2,239,236,412 2,145,955,868 9,618,162,652 2,512,798,517 1,780,326,613 3,491,726,477 2,172,967,239 8,595,482,282 3,317,961,987 8,096,354,503 1,577,898,704 1,201,873,611 97,892,301,967 88,485,031,394 10,829,181,584 10,316,351,016 17,403,014,259 17,403,014,259 88,270,353,369 118,067,395,314 135,470,409,573 135,470,409,573 As at 31 Ashad 2076 As at 31 Ashad 2076 - - - - Sunir Kumar Dhungel Managing Partner SAR Associates Accountants Chartered 73,556 218.98 5,871,843 60,051,484 59,774,627 22,643,811 69,938,833 660,071,641 517,547,945 321,720,000 276,407,171 131,480,054 7,477,483,892 1,036,268,951 1,182,081,898 1,871,616,566 7,603,290,634 4,066,854,498 2,476,497,798 2,502,931,208 7,506,751,485 2,497,567,769 5,956,726,206 6,864,740,937 9,608,368,211 1,594,345,849 4,909,055,046 84,509,502,746 74,413,584,770 16,649,574,138 16,781,054,193 84,803,180,879 97,320,570,522 114,101,624,715 114,101,624,715 As at 32 Ashad 2075 As at 32 Ashad 2075 Group - - - - 183.11 224,219 8,605,751 38,039,788 74,165,032 624,364,996 340,390,000 102,915,862 116,673,171 165,396,616 3,203,523,072 8,458,374,429 4,828,300,209 2,675,953,373 2,239,236,412 9,618,162,652 2,512,798,517 1,961,722,547 3,519,188,757 8,595,482,282 3,317,961,987 8,801,746,664 2,172,967,239 1,616,577,616 1,229,893,858 98,830,664,647 91,011,889,312 10,845,211,584 10,458,681,378 Mridul Parajuli & Planning Head-Finance Rajendra Kafl e Kafl Rajendra Director 17,611,872,473 17,777,269,089 88,270,903,369 120,907,286,896 138,684,555,985 138,684,555,985 As at 31 Ashad 2076 As at 31 Ashad 2076 4.9 4.4 4.5 4.6 4.7 4.1 4.2 4.3 4.8 4.9 4.18 4.19 4.20 4.17 4.21 4.22 4.15 4.25 4.23 4.24 4.26 4.27 4.28 4.11 4.10 4.12 4.13 4.14 4.15 4.16 Note Note Nico Pijl Director Navin Manandhar cer Offi Chief Finance Pawan Kumar Golyan Chairman Pradeep Raj Pandey Pradeep Director Due to Nepal Rastra Bank Due to Nepal Rastra nancial instruments fi Derivative customers Deposits from Liabilities Instituions Due to Bank and Financial Borrowing Current Tax Liabilities Tax Current Provisions Deferred tax liabilities Deferred Liabilities Subordinated Other liabilities Debt securities issued liabilities Total Equity capital Share premium Share Retained earnings Reserves equity attributable to holders Total interest Non-controlling equity Total liabilities and equity Total Contingent liabilities and commitment per share Net Assets Value Derivative fi nancial instruments fi Derivative assets Other trading Loan and advances to B/FIs Loans and advances to customers Particulars Assets Cash and cash equivalent Bank Nepal Rastra Due from Institutions Placement with Bank and Financial securities Investment tax assets Current in associates Investment Investment in susidiaries Investment property Investment Property and equipment Property Goodwill and Intangible assets Deferred tax assets Deferred Other assets Assets Total Sunil KC CEO Harischandra Subedi Harischandra Director Date: Sunday, November 10, 2019 Date: Sunday, November Place: NMB Bhawan, Babarmahal, Kathmandu

NMB Annual Report-2018/19 37 Consolidated Statement of Proﬁ t or Loss For the year ended 31 Ashad, 2076 (16 July 2019)

(Amount in NPR) Group NMB

Particulars Year ended Year ended Year ended Year ended Note 31 Ashad 2076 32 Ashad 2075 31 Ashad 2076 32 Ashad 2075

Interest income 4.29 11,607,773,819 9,169,057,454 11,082,059,031 8,728,699,831 Interest expense 4.30 7,092,738,463 6,036,130,108 6,838,038,085 5,824,685,753 Net interest income 4,515,035,356 3,132,927,346 4,244,020,946 2,904,014,078 Fee and commission income 4.31 1,159,227,002 939,618,308 1,003,530,866 794,250,068 Fee and commission expense 4.32 101,418,691 69,926,838 93,955,270 62,708,027 Net fee and commission income 1,057,808,311 869,691,470 909,575,596 731,542,041 Net interest, fee and commission income 5,572,843,667 4,002,618,816 5,153,596,542 3,635,556,119 Net trading income 4.33 352,049,490 299,605,983 352,049,490 299,605,983 Other operating income 4.34 212,650,641 166,970,494 210,373,919 164,962,228 Total operating income 6,137,543,798 4,469,195,293 5,716,019,951 4,100,124,330 Impairment charge/(reversal) for loans and 4.35 176,055,082 (192,047,347) 166,272,634 (219,650,789) other losses Net operating income 5,961,488,716 4,661,242,640 5,549,747,317 4,319,775,119 Operating expense Personnel expenses 4.36 1,587,182,602 1,157,939,860 1,415,793,493 1,021,570,435 Other operating expenses 4.37 764,153,498 642,723,322 708,661,406 589,394,199 Depreciation & Amortisation 4.38 187,669,499 155,987,560 176,793,355 147,695,238 Operating Profi t 3,422,483,117 2,704,591,898 3,248,499,063 2,561,115,247 Non operating income 4.39 17,090,672 43,140,193 17,090,672 43,140,193 Non operating expense 4.40 17,609,148 37,935,379 17,585,901 37,935,379 Profi t before income tax 3,421,964,641 2,709,796,712 3,248,003,834 2,566,320,061 Income tax expense 4.41 Current Tax 1,043,451,780 865,791,637 994,167,044 829,621,042 Deferred Tax expense/(Income) (1,877,083) (116,372,096) (3,439,237) (117,093,734) Profi t for the period 2,380,389,944 1,960,377,171 2,257,276,027 1,853,792,753 Profi t attributable to: Equity holders of the Bank 2,345,558,841 1,940,103,356 2,257,276,027 1,853,792,753 Non-controlling interest 34,831,103 20,273,815 - - Profi t for the period 2,380,389,944 1,960,377,171 2,257,276,027 1,853,792,753 Earnings per share Basic earnings per share (BEPS) 24.46 22.88 23.54 21.86 Diluted earnings per share (DEPS) 24.46 22.88 23.54 21.86 As per our attached report of even date

Sunil KC Pawan Kumar Golyan Nico Pijl Rajendra Kaﬂ e Sunir Kumar Dhungel CEO Chairman Director Director Managing Partner SAR Associates Chartered Accountants Harischandra Subedi Pradeep Raj Pandey Navin Manandhar Mridul Parajuli Director Director Chief Finance Oﬃ cer Head-Finance & Planning

Date: Sunday, November 10, 2019 Place: NMB Bhawan, Babarmahal, Kathmandu

38 www.nmbbanknepal.com Consolidated Statement of Other Comprehensive Income For the year ended 31 Ashad, 2076 (16 July 2019)

(Amount in NPR) Group NMB

Particulars Year ended 31 Year ended 32 Year ended 31 Year ended 32 Ashad 2076 Ashad 2075 Ashad 2076 Ashad 2075

Profi t for the year 2,380,389,944 1,960,377,171 2,257,276,027 1,853,792,753 Other comprehensive income, net of income tax a) Items that will not be reclassifi ed to profi t or loss - Gains/(losses) from investments in equity instru- 2,474,640 (41,011,310) 2,162,140 (38,270,067) ments measured at fair value - Gains/(losses) on revalution - - - - - Atuarial gains/(losses) on defi ned benefi t plans (4,188,587) (24,750,032) (1,269,955) (24,971,604) -Income tax relating to above items (514,184) (19,728,403) 267,656 (18,972,501) Net other comprehsive income that will not be (1,199,763) (46,032,939) 624,530 (44,269,170) reclassifi ed to profi t or loss b) Items that are or may be reclassifi ed to profi t or loss - - - - - Gains/(losses) on cash fl ow hedge - - - - - Exchange gains/(losses) (arising from translating - - - - fi nancial assets of foreign operation) - Income tax relating to above items - - - - - Reclassify to profi t or loss - - - - Net other comprehsive income that are or may be - - - - reclassifi ed to profi t or loss c) Share of other comprehensive income of associ- - - - - ate accounted as per equited method Other comprehensive income for the period, net of (1,199,763) (46,032,939) 624,530 (44,269,170) income tax Total comprehensive income for the period 2,379,190,181 1,914,344,230 2,257,900,556 1,809,523,583 Total comprehensive income attributable to: Equity holders of the Bank 2,344,728,421 1,893,994,416 2,257,900,556 1,809,523,583 Non-controlling interest 34,461,761 20,349,814 - - Total comprehensive income for the period 2,379,190,181 1,914,344,230 2,257,900,556 1,809,523,583

As per our attached report of even date

Sunil KC Pawan Kumar Golyan Nico Pijl Rajendra Kaﬂ e Sunir Kumar Dhungel CEO Chairman Director Director Managing Partner SAR Associates Chartered Accountants

Harischandra Subedi Pradeep Raj Pandey Navin Manandhar Mridul Parajuli Director Director Chief Finance Oﬃ cer Head-Finance & Planning

Date: Sunday, November 10, 2019 Place: NMB Bhawan, Babarmahal, Kathmandu

NMB Annual Report-2018/19 39 ------(480) 4,954 2,828,009 1,682,716 1,732,248 (1,216,722) 1,682,716 2,827,529 14,369,250 10,776,938 (1,000,000) (2,932,011) (2,612,928) (5,265,251) 471,569,200 (23,224,340) (17,256,220) (28,707,917) (10,776,938) (14,369,250) (1,000,000) (106,746,053) 2,659,732,979 1,141,516,300 Total equity Total 2,379,190,181 1,960,377,171 2,380,389,944 3,671,278,886 (1,849,894,996) 11,193,679,558 16,781,054,193 16,779,842,425 11,196,292,486 16,781,054,193 17,777,269,089 (1,383,591,047) (Amount in NPR) ------(235) (235) 75,999 (369,342) (726,619) (544,964) (726,619) (544,964) 34,461,761 20,273,815 34,831,103 interest interest 111,856,859 131,480,054 131,480,054 111,856,859 131,480,054 165,396,616 Non-controlling Non-controlling ------(245) 4,954 1,732,248 2,828,009 1,682,716 (2,562,669) 1,682,716 2,827,765 14,369,250 10,776,938 (1,000,000) (2,612,928) (1,216,722) (5,265,251) Total Total 471,569,200 (23,224,340) (17,332,220) (28,707,917) (10,776,938) (14,369,250) (1,000,000) (106,019,434) 2,659,732,979 1,141,516,300 2,344,728,421 1,940,103,356 2,345,558,841 3,672,005,505 (1,849,350,032) 11,081,822,698 16,649,574,138 16,648,362,370 11,084,435,628 16,649,574,138 17,611,872,473 (1,383,046,083) ------5,525,961 1,849,519 4,030,966 11,000,000 17,200,186 17,041,728 90,999,503 90,452,511 (1,000,000) (3,037,118) (6,205,056) (2,562,669) (3,037,118) (17,401,022)

(1,000,000) (2,562,669) 103,685,694 124,178,658 281,736,005 364,983,558 364,983,558 364,983,558 485,599,548 277,705,039.3 Other reserve Other reserve

------4,954 68,802 (166,803) 3,037,118 6,205,056 3,037,118

14,369,250 10,776,938 (2,697,952) (1,731,624) (5,289,025) (2,612,928) (1,216,722) (11,000,000) (17,200,430) (17,041,728) (22,003,093) (90,999,503) (90,452,511) (4,030,966) earning (414,326,452) (404,406,612) (374,094,605) (457,579,767) (106,019,434) Retained (91,650,184) (882,235,818) 2,345,558,841 1,940,103,355 1,507,174,525 2,345,558,841 2,476,497,798 2,475,286,030 1,513,818,419 2,476,497,798 (1,849,350,032) 1,961,722,547 (1,015,260,206) (1,843,862,119) ------Reserve Reserve Revaluation ------1,732,248 1,732,248 reserve reserve 21,883,371 21,883,371 (28,707,917) (6,824,546) (6,824,546) (6,824,546) (5,092,298) Fair value Fair ------Group reserve reserve 414,326,452 404,406,612 404,406,612 414,326,452 404,406,612 404,406,612 404,406,612 818,733,064 Regulatory ------Attributable to equity holders of the Group 1,731,624 reserve reserve 1,731,624 22,003,093 Exchange 22,003,093 54,642,254 56,373,878 56,373,878 54,642,254 56,373,878 78,376,972 equalisation ------374,094,605 457,579,767 reserve reserve General General 374,094,605 457,579,767 1,309,897,100 1,683,991,705 1,683,991,705 1,309,897,100 1,683,991,705 2,141,571,472 ------(5,265,251) 471,569,200 (23,224,340) (14,369,250) 2,659,732,979 (2,020,359,931) 1,444,715,109 4,066,854,498 2,622,139,389 4,066,854,498 1,444,715,109 4,066,854,498 2,512,798,517 (1,554,055,982) Share premium premium Share ------1,141,516,300 2,014,872,018 6,461,774,334 7,603,290,634 1,141,516,300 7,603,290,634 6,461,774,334 7,603,290,634 Share Capital Share 9,618,162,652 2,014,872,018 Share Issue Expenses (net off taxes) Issue Expenses (net off Share Premium Received from FMO from Received Premium Bonus Issue of NMBMF Share Issued Share Share based payments Share Transactions with owners, directly recognised recognised directly with owners, Transactions in equity FPO Issue Expenses (net off taxes) FPO Issue Expenses (net off NMB Staff Relief Fund NMB Staff FPO Issued and Alloted on FPO Issue Premium Staff Fund Skill Development Staff Share Issued Share Transfer from reserve during the year during the year reserve from Transfer Transactions with owners, directly recognised recognised directly with owners, Transactions in equity NMB Staff Relief Fund NMB Staff Staff fund skill development Staff Regulatory Reserve Regulatory Reserve Transfer from reserves during the year during the year reserves from Transfer Deferred Tax Reserve Reserve Tax Deferred Regulatory Reserve Regulatory Reserve Customer Protection Fund Customer Protection Customer Protection Fund Customer Protection Corporate Social Responsibility Fund Corporate Corporate social responsibility fund social responsibility Corporate Staff Fund Skill Development Staff Exchange fl uctuation reserve uctuation reserve Exchange fl Exchange Fluctuation Fund Investment adjustment Reserve adjustment Reserve Investment Investment Adjustment Reserve Adjustment Reserve Investment Debenture redemption reserve reserve redemption Debenture Debenture Redemption Reserve Redemption Reserve Debenture General reserve fund reserve General General Reserve Fund Reserve General Transfer to reserves during the year during the year to reserves Transfer Transfer to reserve during the year during the year to reserve Transfer Exchange Gain/(Losss) (arising from translating translating Exchange Gain/(Losss) (arising from Operation) Assets of Foreign Financial Gain/(Loss) on Cash Flow Hedge Gain/(Loss) on Cash Flow Total comprehensive income for the year income for the year comprehensive Total Acturial Gain/(Loss) on defi ned benefi t plans ned benefi Acturial Gain/(Loss) on defi Exchange Gain/(Losss) (arising from translating translating Exchange Gain/(Losss) (arising from Operation) Assets of Foreign Financial Gain/(Loss) on revaluation Gain/(Loss) on Cash Flow Hedge Gain/(Loss) on Cash Flow Acturial Gain/(Loss) on defi ned benefi t plans ned benefi Acturial Gain/(Loss) on defi Gain/(Loss) from Investment in Equity Instrument Investment Gain/(Loss) from Value at Fair measured Gain/(Loss) on revaluation Other comprehensive income, net of tax Other comprehensive Profi t for the year t for the year Profi Gain/(Loss) from Investment in Equity Instrument Investment Gain/(Loss) from Value at Fair measured Balance at 16 July 2019 Comprehensive income for the year 2017-18 income for the year Comprehensive Other comprehensive income, net of tax Other comprehensive Total contributions by and distributions Total Profi t for the year t for the year Profi Cash dividend paid Adjusted/Restated balance at 16 July 2017 Balance at 16 July 2018 Comprehensive income for the year 2018-19 income for the year Comprehensive Bonus shares issued Bonus shares Transfer to Capital Adjustment Fund Transfer Total contributions by and distributions Total Adjusted/Restated balance at 17 July 2018 Dividends to equity holders Adjustment/Restatement Cash dividend paid Prior Period Taxes Prior Period Taxes Share based payments Share Bonus shares issued Bonus shares Adjustment/Restatement Bonus Share Issue of NMBMF Bonus Share Particulars Balance at 15 July 2017 Dividends to equity holders Balance at 17 July 2018 Consolidated Statement of changes in equity ended 31 Ashad, 2076 (16 July 2019) For the year

40 www.nmbbanknepal.com ------(480) 4,954 2,828,009 1,682,716 1,732,248 (1,216,722) 1,682,716 2,827,529 14,369,250 10,776,938 (1,000,000) (2,932,011) (2,612,928) (5,265,251) 471,569,200 (23,224,340) (17,256,220) (28,707,917) (10,776,938) (14,369,250) (1,000,000) (106,746,053) 2,659,732,979 1,141,516,300 Total equity Total 2,379,190,181 1,960,377,171 2,380,389,944 3,671,278,886 (1,849,894,996) 11,193,679,558 16,781,054,193 16,779,842,425 11,196,292,486 16,781,054,193 17,777,269,089 (1,383,591,047) (Amount in NPR) ------(235) (235) 75,999 (369,342) (726,619) (544,964) (726,619) (544,964) 34,461,761 20,273,815 34,831,103 interest interest 111,856,859 131,480,054 131,480,054 111,856,859 131,480,054 165,396,616 Non-controlling Non-controlling ------(245) 4,954 1,732,248 2,828,009 1,682,716 (2,562,669) 1,682,716 2,827,765 14,369,250 10,776,938 (1,000,000) (2,612,928) (1,216,722) (5,265,251) Total Total 471,569,200 (23,224,340) (17,332,220) (28,707,917) (10,776,938) (14,369,250) (1,000,000) (106,019,434) 2,659,732,979 1,141,516,300 2,344,728,421 1,940,103,356 2,345,558,841 3,672,005,505 (1,849,350,032) 11,081,822,698 16,649,574,138 16,648,362,370 11,084,435,628 16,649,574,138 17,611,872,473 (1,383,046,083) ------5,525,961 1,849,519 4,030,966 11,000,000 17,200,186 17,041,728 90,999,503 90,452,511 (1,000,000) (3,037,118) (6,205,056) (2,562,669) (3,037,118) (17,401,022)

(1,000,000) (2,562,669) 103,685,694 124,178,658 281,736,005 364,983,558 364,983,558 364,983,558 485,599,548 277,705,039.3 Other reserve Other reserve

------4,954 68,802 (166,803) 3,037,118 6,205,056 3,037,118

NMB Annual Report-2018/19 41 ------(888,969) 1,513,498 (5,265,251) (1,216,722) (1,000,000) (1,000,000) 471,569,200 (26,789,047) (17,480,123) (23,224,340) 2,257,276,027 1,141,516,300 2,659,732,979 (1,808,782,825) Total equity Total 3,778,024,939 1,853,792,753 1,809,523,583 2,257,900,556 16,489,809,301 10,902,260,779 17,403,014,259 (1,342,478,876) 16,489,809,301 10,902,260,779 16,488,592,578 (Amount in NPR) ------interest Non-controlling Non-controlling ------(888,969) 1,513,498 (5,265,251) (1,216,722) (1,000,000) (1,000,000) Total 471,569,200 (26,789,047) (17,480,123) (23,224,340) 2,257,276,027 1,141,516,300 2,659,732,979 (1,808,782,825) 3,778,024,939 1,853,792,753 1,809,523,583 2,257,900,556 16,489,809,301 16,489,809,301 17,403,014,259 (1,342,478,876) 10,902,260,779 10,902,260,779 16,488,592,578 ------(888,969) (888,969) 4,030,966 90,999,503 90,452,511 16,874,926 16,894,202 11,000,000 (6,205,056) (3,037,118) (1,000,000) (1,000,000) (17,480,123) (3,037,118) 360,395,836 275,212,739 360,395,836 279,243,705 360,395,836 101,669,372 118,346,713 476,853,581 (17,480,123) Other reserve ------6,205,056 3,037,118 3,037,118 (1,216,722) (1,731,624) (90,999,503) (90,452,511) (22,003,093) (16,874,926) (16,894,202) (11,000,000) (4,030,966) earning Retained (370,758,551) (451,455,205) (404,406,612) (414,326,452) 2,257,276,027 (878,566,159) 2,339,181,597 1,364,948,851 2,339,181,597 1,360,917,885 2,337,964,875 1,853,792,753 1,853,792,753 2,257,276,027 (1,808,782,825) 1,780,326,613 (1,006,131,464) (1,808,782,825) ------Reserve Revaluation ------1,513,498 1,513,498 reserve 19,731,751 19,731,751 (26,789,047) Fair value Fair (7,057,296) (7,057,296) (7,057,296) (5,543,798) (26,789,047) ------reserve NMB 404,406,612 414,326,452 Regulatory 404,406,612 404,406,612 404,406,612 404,406,612 414,326,452 818,733,064 ------1,731,624 1,731,624 22,003,093 reserve 56,373,878 54,642,254 56,373,878 54,642,254 56,373,878 22,003,093 Exchange 78,376,972 equalisation Attributable to equity holders of the Bank ------reserve 370,758,551 451,455,205 General General 370,758,551 451,455,205 1,671,851,454 1,301,092,903 1,671,851,454 1,301,092,903 1,671,851,454 2,123,306,659 ------(5,265,251) 471,569,200 (23,224,340) 2,659,732,979 4,061,366,586 1,424,857,947 2,636,508,639 4,061,366,586 1,424,857,947 4,061,366,586 (2,014,872,018) 2,512,798,517 Share premium Share (1,548,568,069) ------1,141,516,300 2,014,872,018 7,603,290,634 6,461,774,334 Share Capital Share 6,461,774,334 1,141,516,300 7,603,290,634 7,603,290,634 2,014,872,018 9,618,162,652 Balance at 17 July 2018 Share based payments Share Particulars Balance at 15 July 2017 Total contributions by and distributions Total Adjustment/Restatement Dividends to equity holders Transfer to Capital Adjustment Fund Transfer Adjustment/Restatement Balance at 16 July 2018 Prior Period Adjustments Bonus shares issued Bonus shares Adjusted/Restated balance at 16 July 2017 Adjusted/Restated balance at 17 July 2018 Cash dividend paid Profi t for the year Profi Comprehensive income for the year 2017-18 income for the year Comprehensive Comprehensive income for the year 2018-19 income for the year Comprehensive Total contributions by and distributions Total Other comprehensive income, net of tax Other comprehensive Profi t for the year Profi Balance at 16 July 2019 Gain/(Loss) from Investment in Equity Instrument Investment Gain/(Loss) from Value at Fair measured Other comprehensive income, net of tax Other comprehensive Gain/(Loss) on revaluation Gain/(Loss) from Investment in Equity Instrument Investment Gain/(Loss) from Value at Fair measured Acturial Gain/(Loss) on defi ned benefi t plans ned benefi Acturial Gain/(Loss) on defi Gain/(Loss) on revaluation Gain/(Loss) on Cash Flow Hedge Gain/(Loss) on Cash Flow Acturial Gain/(Loss) on defi ned benefi t plans ned benefi Acturial Gain/(Loss) on defi Exchange Gain/(Losss) (arising from translating Finan- translating Exchange Gain/(Losss) (arising from Operation) cial Assets of Foreign Gain/(Loss) on Cash Flow Hedge Gain/(Loss) on Cash Flow Total comprehensive income for the year comprehensive Total Exchange Gain/(Losss) (arising from translating Finan- translating Exchange Gain/(Losss) (arising from Operation) cial Assets of Foreign Transfer to reserve during the year to reserve Transfer Total comprehensive income for the year comprehensive Total General reserve fund reserve General Transfer to reserve during the year to reserve Transfer Debenture redemption reserve redemption Debenture General Reserve Fund Reserve General Investment adjustment Reserve Investment Debenture Redemption Reserve Debenture Regulatory Reserve Exchange fl uctuation reserve Exchange fl Investment Adjustment Reserve Investment Corporate social responsibility fund social responsibility Corporate Corporate Social Responsibility Fund Corporate Exchange Fluctuation Fund Transfer from reserve during the year reserve from Transfer Customer Protection Fund Customer Protection Staff Fund Skill Development Staff Deferred Tax Reserve Tax Deferred Transactions with owners, directly recognised in recognised directly with owners, Transactions equity Share based payments Share Share Issued Share Regulatory Reserve FPO Issued and Alloted NMB Staff Relief Fund NMB Staff Premium on FPO Issue Premium Transfer from reserve during the year reserve from Transfer FPO Issue Expenses (net off taxes) FPO Issue Expenses (net off Staff Fund Skill Development Staff Share based payments Share NMB Staff Relief Fund NMB Staff Dividends to equity holders Transactions with owners, directly recognised in recognised directly with owners, Transactions equity Bonus shares issued Bonus shares Share Issued Share Cash dividend paid Premium Received from FMO from Received Premium Share Issue Expenses (net off taxes) Issue Expenses (net off Share Consolidated Statement of changes in equity ended 31 Ashad, 2076 (16 July 2019) For the year

42 www.nmbbanknepal.com ------(888,969) 1,513,498 (5,265,251) (1,216,722) (1,000,000) (1,000,000) 471,569,200 (26,789,047) (17,480,123) (23,224,340) 2,257,276,027 1,141,516,300 2,659,732,979 (1,808,782,825) Total equity Total 3,778,024,939 1,853,792,753 1,809,523,583 2,257,900,556 16,489,809,301 10,902,260,779 17,403,014,259 (1,342,478,876) 16,489,809,301 10,902,260,779 16,488,592,578 (Amount in NPR) ------interest Non-controlling Non-controlling ------As per our attached report of even date of even As per our attached report (888,969) 1,513,498 (5,265,251) (1,216,722) (1,000,000) (1,000,000) Total 471,569,200 (26,789,047) (17,480,123) (23,224,340) 2,257,276,027 1,141,516,300 2,659,732,979 (1,808,782,825) 3,778,024,939 1,853,792,753 1,809,523,583 2,257,900,556 16,489,809,301 16,489,809,301 17,403,014,259 (1,342,478,876) 10,902,260,779 10,902,260,779 16,488,592,578 ------(888,969) (888,969) 4,030,966 90,999,503 90,452,511 16,874,926 16,894,202 11,000,000 (6,205,056) (3,037,118) (1,000,000) (1,000,000) (17,480,123) (3,037,118) 360,395,836 275,212,739 360,395,836 279,243,705 360,395,836 101,669,372 118,346,713 476,853,581 (17,480,123) Other reserve ------6,205,056 3,037,118 3,037,118 (1,216,722) (1,731,624) (90,999,503) (90,452,511) (22,003,093) (16,874,926) (16,894,202) (11,000,000) (4,030,966) earning Retained (370,758,551) (451,455,205) (404,406,612) (414,326,452) 2,257,276,027 (878,566,159) 2,339,181,597 1,364,948,851 2,339,181,597 1,360,917,885 2,337,964,875 1,853,792,753 1,853,792,753 2,257,276,027 (1,808,782,825) 1,780,326,613 Sunir Kumar Dhungel Managing Partner SAR Associates Accountants Chartered (1,006,131,464) (1,808,782,825) ------Reserve Revaluation ------1,513,498 1,513,498 reserve 19,731,751 19,731,751 (26,789,047) Fair value Fair (7,057,296) (7,057,296) (7,057,296) (5,543,798) (26,789,047) ------reserve NMB 404,406,612 414,326,452 Regulatory 404,406,612 404,406,612 404,406,612 404,406,612 414,326,452 818,733,064 ------Mridul Parajuli & Planning Head-Finance Rajendra Kafl e Kafl Rajendra Director ------1,731,624 1,731,624 22,003,093 reserve 56,373,878 54,642,254 56,373,878 54,642,254 56,373,878 22,003,093 Exchange 78,376,972 equalisation Attributable to equity holders of the Bank ------reserve 370,758,551 451,455,205 General General 370,758,551 451,455,205 1,671,851,454 1,301,092,903 1,671,851,454 1,301,092,903 1,671,851,454 2,123,306,659 ------Nico Pijl Director Navin Manandhar cer Offi Chief Finance (5,265,251) 471,569,200 (23,224,340) 2,659,732,979 4,061,366,586 1,424,857,947 2,636,508,639 4,061,366,586 1,424,857,947 4,061,366,586 (2,014,872,018) 2,512,798,517 Share premium Share (1,548,568,069) ------1,141,516,300 2,014,872,018 7,603,290,634 6,461,774,334 Share Capital Share 6,461,774,334 1,141,516,300 7,603,290,634 7,603,290,634 2,014,872,018 9,618,162,652 Pawan Kumar Golyan Chairman Pradeep Raj Pandey Pradeep Director Balance at 17 July 2018 Share based payments Share Particulars Balance at 15 July 2017 Total contributions by and distributions Total Adjustment/Restatement Dividends to equity holders Transfer to Capital Adjustment Fund Transfer Adjustment/Restatement Balance at 16 July 2018 Prior Period Adjustments Bonus shares issued Bonus shares Adjusted/Restated balance at 16 July 2017 Adjusted/Restated balance at 17 July 2018 Cash dividend paid Profi t for the year Profi Comprehensive income for the year 2017-18 income for the year Comprehensive Comprehensive income for the year 2018-19 income for the year Comprehensive Total contributions by and distributions Total Other comprehensive income, net of tax Other comprehensive Profi t for the year Profi Balance at 16 July 2019 Gain/(Loss) from Investment in Equity Instrument Investment Gain/(Loss) from Value at Fair measured Other comprehensive income, net of tax Other comprehensive Gain/(Loss) on revaluation Gain/(Loss) from Investment in Equity Instrument Investment Gain/(Loss) from Value at Fair measured Acturial Gain/(Loss) on defi ned benefi t plans ned benefi Acturial Gain/(Loss) on defi Gain/(Loss) on revaluation Gain/(Loss) on Cash Flow Hedge Gain/(Loss) on Cash Flow Acturial Gain/(Loss) on defi ned benefi t plans ned benefi Acturial Gain/(Loss) on defi Exchange Gain/(Losss) (arising from translating Finan- translating Exchange Gain/(Losss) (arising from Operation) cial Assets of Foreign Gain/(Loss) on Cash Flow Hedge Gain/(Loss) on Cash Flow Total comprehensive income for the year comprehensive Total Exchange Gain/(Losss) (arising from translating Finan- translating Exchange Gain/(Losss) (arising from Operation) cial Assets of Foreign Transfer to reserve during the year to reserve Transfer Total comprehensive income for the year comprehensive Total General reserve fund reserve General Transfer to reserve during the year to reserve Transfer Debenture redemption reserve redemption Debenture General Reserve Fund Reserve General Investment adjustment Reserve Investment Debenture Redemption Reserve Debenture Regulatory Reserve Exchange fl uctuation reserve Exchange fl Investment Adjustment Reserve Investment Corporate social responsibility fund social responsibility Corporate Corporate Social Responsibility Fund Corporate Exchange Fluctuation Fund Transfer from reserve during the year reserve from Transfer Customer Protection Fund Customer Protection Staff Fund Skill Development Staff Deferred Tax Reserve Tax Deferred Transactions with owners, directly recognised in recognised directly with owners, Transactions equity Share based payments Share Share Issued Share Regulatory Reserve FPO Issued and Alloted NMB Staff Relief Fund NMB Staff Premium on FPO Issue Premium Transfer from reserve during the year reserve from Transfer FPO Issue Expenses (net off taxes) FPO Issue Expenses (net off Staff Fund Skill Development Staff Share based payments Share NMB Staff Relief Fund NMB Staff Dividends to equity holders Transactions with owners, directly recognised in recognised directly with owners, Transactions equity Bonus shares issued Bonus shares Share Issued Share Cash dividend paid Premium Received from FMO from Received Premium Share Issue Expenses (net off taxes) Issue Expenses (net off Share Sunil KC CEO Harischandra Subedi Harischandra Director Date: Sunday, November 10, 2019 Date: Sunday, November Place: NMB Bhawan, Babarmahal, Kathmandu

NMB Annual Report-2018/19 43 ------6,926,498 10,583,525 73,597,200 129,872,956 406,887,994 384,317,755 132,758,055 790,304,114 357,555,417 (55,347,308) (23,440,000) (12,210,798) (21,881,950) (62,708,027) (633,132,526) (450,487,159) (634,657,961) (268,775,840) (100,000,000) (613,344,690) (Amount in NPR) (21,881,950) 2,223,142,470 2,402,193,785 8,377,760,162 5,499,968,622 8,364,873,036 2075 11,653,200,615 (326,491,015) (2,868,310,588) (5,828,082,883) (1,013,279,499) 1,498,631,616 1,995,317,467 5,180,404,105 (10,401,270,740) (12,646,608,128) 13,500,381,574 (1,803,240,682) (13,363,934,899) Year ended 32 Ashad Year ------NMB 92,022,568 10,844,000 71,020,758 88,012,372 387,420,114 660,235,537 466,303,949 970,870,892 384,775,861 (18,670,000) (53,480,759) (93,955,270) (7,722,956) 334,837,550 (411,903,955) (817,737,763) (199,177,763) (106,455,282) (700,390,033) 2,543,451,431 3,468,060,000 3,573,449,198 4,351,536,812 1,684,505,000 5,180,404,105 (4,834,268,827) 2076 13,921,434,748 10,029,237,559 (1,125,413,472) (3,978,276,184) (2,265,215,135) (1,815,971,398) (6,561,973,326) (1,295,324,891) 2,500,823,432 2,733,240,793 2,827,938,026 8,096,354,503 (15,509,016,343) 19,908,462,338 (19,015,466,228) Year ended 31 Ashad Year ------6,926,498 11,583,879 73,597,200 129,872,956 141,151,539 338,994,868 384,317,755 134,100,160 100,000,000 929,787,387 358,041,840 (23,440,000) (12,888,798) (69,926,838) (664,974,613) (450,487,159) (634,657,961) (284,530,625) (100,000,000) (128,628,002) (669,041,524) (28,628,002) 2,033,609,256 2,387,693,785 8,381,577,243 6,458,150,739 8,794,988,534 2075 11,945,557,284 (508,351,031) (2,861,359,668) (6,039,527,238) (1,147,047,730) 1,454,395,634 2,157,274,431 5,956,726,206 (13,044,839,083) (10,521,875,476) 13,799,703,876 (1,934,118,662) (13,837,608,060) Year ended 32 Ashad Year ------Group 92,584,085 10,844,000 71,020,758 13,301,500 88,012,372 382,545,373 660,235,537 466,303,949 385,714,392 (18,670,000) (53,480,759) (93,955,270) 307,026,879 (411,903,955) (817,737,763) (210,592,007) (107,102,744) (767,592,573) (78,559,632) 2,531,451,431 3,758,194,083 3,553,083,797 4,292,200,326 1,684,505,000 6,024,619,332 1,132,864,080 2076 14,395,099,867 10,546,876,485 (1,172,181,378) (3,970,076,184) (2,265,215,135) (4,834,268,827) (1,857,083,570) (6,823,042,020) (1,456,045,782) 2,460,647,713 2,924,819,312 2,689,114,960 8,801,746,664 (16,428,761,736) 20,655,386,800 (19,947,377,021) Year ended 31 Ashad Year Income taxes paid activities operating from ow Net cash fl Deposit from customers Deposit from Total liabilities in operating Increase/(Decrease) nancial institutions Due to bank and fi Bank Due to Nepal Rastra Borrowings Other liabilities Loans and advances to customers Other assets (Increase)/Decrease in operating assets in operating (Increase)/Decrease Bank Nepal Rastra Due from nancial institutions Placement with bank and fi Other trading assets Other trading Loan and advances to bank and fi nancial institutions Loan and advances to bank fi tax paid activities before operating from ow Net cash fl FROM INVESTING ACTIVITIES CASH FLOWS securities of investment Purchase Receipts from sale of investment securities sale of investment Receipts from Purchase of property and equipment of property Purchase and equipment the sale of property Receipt from of intangible assets Purchase Receipt from the sale of intangible assets Receipt from Purchase of investment properties of investment Purchase Receipt from the sale of investment properties the sale of investment Receipt from in subsidiaries, associates & joint ventures Investment Interest received Interest Dividend received Repayment of debt securities Net cash used in investing activities Net cash used in investing FROM FINANCING ACTIVITIES CASH FLOWS issue of debt securities Receipt from liabilities issue of subordinated Receipt from Repayment of subordinated liabilities Repayment of subordinated Receipt from issue of shares Receipt from Dividends paid Interest paid Interest Other receipt/payment Cash and cash equivalents at the beginning of year Net cash from fi nancing activities fi Net cash from in cash and equivalents (decrease) Net increase the merger from Cash and cash equivalents acquired Eff ect of exchange rate fl uctuations on cash and equivalents held fl ect of exchange rate Eff Cash and cash equivalents at the end of year Operating cash flows before changes in operating assets and liabilities changes in operating before cash flows Operating Particulars CASH FLOWS FROM OPERATING ACTIVITIES FROM OPERATING CASH FLOWS received Interest Fees and other income received Dividend received Receipts from other operating activities other operating Receipts from Interest paid Interest Commission and fees paid Cash payment to employees Other expense paid Consolidated Statement of cash fl ows Consolidated Statement of cash fl ended 31 Ashad, 2076 (16 July 2019) For the year

44 www.nmbbanknepal.com ------6,926,498 10,583,525 73,597,200 384,317,755 132,758,055 790,304,114 357,555,417 406,887,994 129,872,956 (21,881,950) (12,210,798) (62,708,027) (23,440,000) (55,347,308) (100,000,000) (268,775,840) (613,344,690) (450,487,159) (634,657,961) (633,132,526) (Amount in NPR) (21,881,950) 5,499,968,622 8,377,760,162 8,364,873,036 2,402,193,785 2,223,142,470 2075 11,653,200,615 (326,491,015) (5,828,082,883) (1,013,279,499) (2,868,310,588) 5,180,404,105 1,995,317,467 1,498,631,616 (10,401,270,740) (12,646,608,128) 13,500,381,574 (1,803,240,682) (13,363,934,899) Year ended 32 Ashad Year ------NMB As per our attached report of even date of even As per our attached report 71,020,758 88,012,372 92,022,568 10,844,000 660,235,537 466,303,949 970,870,892 384,775,861 387,420,114 (53,480,759) (93,955,270) (18,670,000) (7,722,956) 334,837,550 (199,177,763) (106,455,282) (700,390,033) (411,903,955) (817,737,763) 1,684,505,000 5,180,404,105 4,351,536,812 2,543,451,431 3,573,449,198 3,468,060,000 (4,834,268,827) 2076 10,029,237,559 13,921,434,748 (1,815,971,398) (6,561,973,326) (1,295,324,891) (3,978,276,184) (2,265,215,135) (1,125,413,472) 2,827,938,026 8,096,354,503 2,733,240,793 2,500,823,432 (15,509,016,343) 19,908,462,338 (19,015,466,228) Year ended 31 Ashad Year ------Sunir Kumar Dhungel Managing Partner SAR Associates Accountants Chartered 6,926,498 11,583,879 73,597,200 384,317,755 134,100,160 100,000,000 929,787,387 358,041,840 338,994,868 129,872,956 141,151,539 (12,888,798) (69,926,838) (23,440,000) (100,000,000) (128,628,002) (284,530,625) (669,041,524) (450,487,159) (634,657,961) (664,974,613) (28,628,002) 6,458,150,739 8,381,577,243 8,794,988,534 2,387,693,785 2,033,609,256 2075 11,945,557,284 (508,351,031) (6,039,527,238) (1,147,047,730) (2,861,359,668) 5,956,726,206 2,157,274,431 1,454,395,634 (10,521,875,476) (13,044,839,083) 13,799,703,876 (1,934,118,662) (13,837,608,060) Year ended 32 Ashad Year ------Group 71,020,758 13,301,500 88,012,372 92,584,085 10,844,000 660,235,537 466,303,949 385,714,392 382,545,373 (53,480,759) (93,955,270) (18,670,000) 307,026,879 (210,592,007) (107,102,744) (767,592,573) (411,903,955) (817,737,763) (78,559,632) 1,684,505,000 6,024,619,332 4,292,200,326 1,132,864,080 2,531,451,431 3,758,194,083 3,553,083,797 2076 10,546,876,485 14,395,099,867 (1,857,083,570) (4,834,268,827) (6,823,042,020) (1,456,045,782) (3,970,076,184) (2,265,215,135) (1,172,181,378) 2,689,114,960 8,801,746,664 2,924,819,312 2,460,647,713 (16,428,761,736) 20,655,386,800 Mridul Parajuli & Planning Head-Finance Rajendra Kafl e Kafl Rajendra Director (19,947,377,021) Year ended 31 Ashad Year Nico Pijl Director Navin Manandhar cer Offi Chief Finance Pawan Kumar Golyan Chairman Pradeep Raj Pandey Pradeep Director Interest received Interest Dividend received Repayment of debt securities Net cash used in investing activities Net cash used in investing FROM FINANCING ACTIVITIES CASH FLOWS issue of debt securities Receipt from liabilities issue of subordinated Receipt from Repayment of subordinated liabilities Repayment of subordinated Receipt from issue of shares Receipt from Dividends paid Interest paid Interest Other receipt/payment Net cash from fi nancing activities fi Net cash from Cash and cash equivalents at the beginning of year Net increase (decrease) in cash and equivalents (decrease) Net increase the merger from Cash and cash equivalents acquired Eff ect of exchange rate fl uctuations on cash and equivalents held fl ect of exchange rate Eff Cash and cash equivalents at the end of year Investment in subsidiaries, associates & joint ventures Investment CASH FLOWS FROM INVESTING ACTIVITIES CASH FLOWS securities of investment Purchase Receipts from sale of investment securities sale of investment Receipts from Purchase of property and equipment of property Purchase and equipment the sale of property Receipt from of intangible assets Purchase Receipt from the sale of intangible assets Receipt from Purchase of investment properties of investment Purchase Receipt from the sale of investment properties the sale of investment Receipt from Particulars CASH FLOWS FROM OPERATING ACTIVITIES FROM OPERATING CASH FLOWS received Interest Fees and other income received Dividend received Receipts from other operating activities other operating Receipts from Interest paid Interest Commission and fees paid Cash payment to employees Other expense paid assets and liabilities changes in operating before cash flows Operating (Increase)/Decrease in operating assets in operating (Increase)/Decrease Bank Nepal Rastra Due from nancial institutions Placement with bank and fi Other trading assets Other trading customers Deposit from Total liabilities in operating Increase/(Decrease) nancial institutions Due to bank and fi Bank Due to Nepal Rastra Borrowings Loan and advances to bank and fi nancial institutions Loan and advances to bank fi Loans and advances to customers Other assets Other liabilities tax paid activities before operating from ow Net cash fl Income taxes paid activities operating from ow Net cash fl Sunil KC CEO Harischandra Subedi Harischandra Director Date: Sunday, November 10, 2019 Date: Sunday, November Place: NMB Bhawan, Babarmahal, Kathmandu

NMB Annual Report-2018/19 45 - 4.1 4.2 819,450,700 236,768,728 2,409,717,758 5,136,353,504 2,123,841,056 1,714,466,919 7,260,194,560 5,180,404,105 As at 32 Ashad 2075 As at 32 Ashad 2075 - NMB NMB 909,222,157 522,936,277 2,452,131,879 8,252,536,442 2,576,645,141 4,212,064,190 8,096,354,503 10,829,181,584 As at 31 Ashad 2076 As at 31 Ashad 2076 - 236,768,728 2,409,735,309 5,160,583,504 1,595,755,250 1,704,157,433 1,714,466,919 6,864,740,937 5,956,726,206 As at 32 Ashad 2075 As at 32 Ashad 2075 - Group Group 522,936,277 2,452,263,134 8,268,566,442 1,614,483,063 2,576,645,141 4,212,064,190 8,801,746,664 10,845,211,584 As at 31 Ashad 2076 As at 31 Ashad 2076 Particulars Particulars Cash and cash equivalent Bank Nepal Rastra Due from Cash in hand Statutory balances with NRB Balances with B/FIs agreement under resale Securities purchased Money at call and short notice Other deposit and receivable from NRB from Other deposit and receivable Other Total Total Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year The fair value of cash is the carrying amount. Cash and cash equivalent comprise the total amount of cash-in-hand, balances with other bank and fi nancial institutions, money at call and amount. Cash and cash equivalent comprise the total amount of cash-in-hand, balances with other bank fi The fair value of cash is the carrying months. months or less than three bills and placements having original maturity of three short notice, treasury Cash held liquidity and business requirements. nancial risks. The amount of cash at vault is maintained on the basis regulatory, for physical and fi Cash at vault is adequately insured to managed. The income on these assets is credited promptly ed, are and risks, if identifi closely monitored, These are exchange rates. in FCY is subject to risk of changes the foreign income. t or loss under interest statement of profi amount. bank and other deposits at NRB is the carrying The fair value of balance with the central placed on and liquidity restrictions regulatory are bank. There by the central required ratio cash reserve bank is principally maintained as a part of the regulatory Balance with the central Bank is subsequently also Nepal Rastra bodies. Due from of Government of Li.Ka Accounts (contra) NRB is receivable from bank. The other receivable of balance with the central the level at amortised cost. measured

46 www.nmbbanknepal.com ------4.3 4.4 276,407,171 782,333,323 276,407,171 1,392,798,943 5,331,619,218 7,506,751,485 As at 32 Ashad 2075 As at 32 Ashad 2075 ------NMB NMB 556,089,044 2,172,967,239 1,899,469,355 6,139,923,883 2,172,967,239 8,595,482,282 As at 31 Ashad 2076 As at 31 Ashad 2076 ------276,407,171 782,333,323 276,407,171 1,392,798,943 5,331,619,218 7,506,751,485 As at 32 Ashad 2075 As at 32 Ashad 2075 ------Group Group 556,089,044 2,172,967,239 1,899,469,355 6,139,923,883 2,172,967,239 8,595,482,282 As at 31 Ashad 2076 As at 31 Ashad 2076 Particulars Particulars Placements with Bank and Financial Instituitions Placements with Bank and Financial nancial instruments fi Derivative Placement with domestic B/FIs B/FIs Placement with foreign Held for trading swap rate Interest Less: Allowances for impairment Less: Allowances Currency swap Currency Total Forward exchange contract Forward Others Held for risk management swap rate Interest Currency swap Currency Forward exchange contract Forward Other Total Derivatives are fi nancial instruments that derive their value in response to changes in interest rates, fi nancial instrument prices etc.All derivatives are initially recognised and subsequently initially recognised are nancial instrument prices etc.All derivatives fi rates, to changes in interest their value in response nancial instruments that derive fi are Derivatives rates market forward the using determined is value Fair Income. trading Net under Loss or t Profi Statement of the in recognised losses or gains trading all with value, at fair measured date. ruling on the reporting These assets are measured at amortised costs. Risks associated with these assets are regularly assessed. These are interest bearing advances and the income on these assets is credited credited is assets these on and the income advances bearing interest are These assessed. regularly are assets with these associated Risks costs. amortised at measured are assets These income. t or loss under interest to statement of profi

NMB Annual Report-2018/19 47 ------4.5 4.6 25,197,842 321,720,000 321,720,000 321,720,000 2,522,765,611 2,497,567,769 As at 32 Ashad 2075 As at 32 Ashad 2075 ------NMB NMB 34,147,985 340,390,000 340,390,000 340,390,000 3,352,109,972 3,317,961,987 As at 31 Ashad 2076 As at 31 Ashad 2076 ------25,197,842 321,720,000 321,720,000 321,720,000 2,522,765,611 2,497,567,769 As at 32 Ashad 2075 As at 32 Ashad 2075 ------Group Group 34,147,985 340,390,000 340,390,000 340,390,000 3,352,109,972 3,317,961,987 As at 31 Ashad 2076 As at 31 Ashad 2076 Particulars Particulars Other trading assets Other trading Loan and advances to B/FIs Teasury bills Teasury nance institutions Loans to microfi Government bonds Government Other NRB Bonds for impairment Less: Allowances Total Domestic Corporate bonds Domestic Corporate Equities Other Total Pledged Non-pledged Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year Citizens Saving Certifi cates are purchased by the bank under Market Maker Procedure, 2070 issued by the Nepal Rastra Bank. These instruments are purchased and sold by the bank under purchased Bank. These instruments are 2070 issued by the Nepal Rastra Procedure, Maker by the bank under Market purchased cates are Citizens Saving Certifi amount. the carrying approximates without any intention to hold it till maturity. The fair value of these CSCs generally procedure market er under this head aﬅ sector lending is presented nancial institutions as deprived nance fi to microfi Loan and advances given interest assessed. These are regularly at amortised costs. Risks associated with these assets are subsequently measured These assets are impairment allowances. required providing income. t or loss under interest to statement of profi bearing advances and the income on these assets is credited

48 www.nmbbanknepal.com - - - - 4.7 6,346,580 18,851,263 821,733,216 385,721,724 25,197,842 73,919,226,706 72,711,771,766 72,711,771,766 As at 32 Ashad 2075 As at 32 Ashad 2075 - - - - NMB NMB 8,950,143 25,197,842 977,833,534 386,943,898 34,147,985 89,849,808,825 88,485,031,394 88,485,031,394 As at 31 Ashad 2076 As at 31 Ashad 2076 - - - - - 6,346,580 18,851,263 843,404,146 421,282,405 25,197,842 75,678,271,321 74,413,584,770 74,413,584,770 As at 32 Ashad 2075 As at 32 Ashad 2075 - - - - - Group Group 8,950,143 25,197,842 993,674,668 438,116,822 34,147,985 92,443,680,801 91,011,889,312 91,011,889,312 As at 31 Ashad 2076 As at 31 Ashad 2076 Particulars 4.6.1: Allowances for impairment 4.6.1: Allowances Particulars Loans and advances to customers Loan and advances measured at amortized cost Loan and advances measured Balance at Shrawan 1 Balance at Shrawan Impairment loss for the year: Less: Impairment allowances Collective impairment Collective Charge for the year Charge Individual impairment Recoveries/reversal Net amount Amount written off Amount written off Loan and advances measured at FVTPL Loan and advances measured Balance at Ashad end Total The sum of the outstanding amount of all loans and advances extended to the customers other than BFIs, bills purchased and discounted and amortized cost of staff loans; less the amount and discounted amortized cost of staff The sum of the outstanding amount all loans and advances extended to customers other than BFIs, bills purchased under this head. is presented of impairment allowances

NMB Annual Report-2018/19 49 8,000,000 417,471,461 605,720,012 187,373,772 3,099,974,826 3,939,614,346 8,411,862,846 3,717,309,146 4,607,041,027 1,230,213,682 14,268,625,654 16,124,798,315 17,301,221,618 73,731,852,934 73,919,226,706 As at 32 Ashad 2075 - NMB 294,605,497 691,436,278 608,939,548 5,929,688,112 4,146,313,974 9,191,498,367 3,270,011,964 4,179,117,890 1,235,353,629 21,819,278,827 18,332,571,900 20,150,992,840 89,240,869,277 89,849,808,825 As at 31 Ashad 2076 8,000,000 417,471,461 611,927,024 215,488,951 3,099,974,826 3,939,614,346 8,411,862,846 3,717,309,146 4,607,041,027 2,954,936,105 14,268,625,654 16,124,798,315 17,301,221,618 75,462,782,369 75,678,271,321 As at 32 Ashad 2075 - Group 294,605,497 698,451,305 651,519,078 5,929,688,112 4,146,313,974 9,191,498,367 3,270,011,964 4,179,117,890 3,779,631,047 21,819,278,827 18,332,571,900 20,150,992,840 91,792,161,723 92,443,680,801 As at 31 Ashad 2076 4.7.1: Analysis of loan and advances - By Product Particulars Product loans Term Overdraﬅ Overdraﬅ Trust receipt/Import loans receipt/Import Trust Demand and other working capital loans Personal residential loans Personal residential Real estate loans Margin lending loans Margin Hire purchase loans purchase Hire Deprived sector loans Deprived Bills purchased Bills purchased Staﬀ loans Staﬀ Other Sub total Interest receivable Interest Grand total Grand Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

50 www.nmbbanknepal.com ------920,102 7,538,789 83,000,167 19,534,280 498,271,513 1,643,853,338 72,255,839,089 73,329,496,135 73,919,226,706 73,919,226,706 73,919,226,706 As at 32 Ashad 2075 As at 32 Ashad 2075 ------NMB NMB 4,511,679 18,898,358 89,125,832 19,896,022 385,025,416 3,477,759,306 86,352,153,497 89,352,247,540 89,849,808,825 89,849,808,825 89,849,808,825 As at 31 Ashad 2076 As at 31 Ashad 2076 ------920,102 484,068 7,538,789 83,000,167 19,534,280 498,271,513 1,643,853,338 1,425,998,448 74,014,883,703 73,662,058,233 75,678,271,321 75,678,271,321 75,678,271,321 As at 32 Ashad 2075 As at 32 Ashad 2075 ------Group Group 674,466 4,511,679 18,898,358 89,125,832 19,896,022 385,025,416 3,477,759,306 2,121,594,170 88,946,025,473 89,823,850,881 92,443,680,801 92,443,680,801 92,443,680,801 As at 31 Ashad 2076 As at 31 Ashad 2076 4.7.2: Analysis of loan and advances - By Currency Particulars 4.7.3: Analysis of loan and advances - By Collateral to the loans and advances customers are corresponding securities to mitigate the default risk. The type of collaterals by collateral backed Loans and advances to customers are in the table below. given Particulars Nepalese rupee Secured assets Movable/immovable Indian rupee Gold and silver United State dollar of domestic B/FIs Guarantee Great Britain pound Great guarantee Government Guarantee of international rated bank of international rated Guarantee Euro Japenese yen of export document Collateral Chinese yuan xed deposit receipt of ﬁ Collateral Other securities of Governement Collateral Total Counter guarantee Personal guarantee Other collateral Subtotal Unsecured Grant Total Grant

NMB Annual Report-2018/19 51 4.8 96,873,328 553,478,827 708,385,395 385,721,724 724,859,889 821,733,216 (322,663,671) 8,894,967,898 9,448,446,725 1,207,454,940 As at 32 Ashad 2075 As at 32 Ashad 2075 NMB NMB 1,222,174 625,362,439 156,100,317 385,721,724 386,943,898 821,733,216 977,833,534 9,690,988,576 1,364,777,431 10,316,351,016 As at 31 Ashad 2076 As at 31 Ashad 2076 ------96,873,328 584,311,327 724,859,889 719,924,493 421,282,405 821,733,216 (298,642,088) 9,024,056,884 9,608,368,211 1,243,015,621 As at 32 Ashad 2075 As at 32 Ashad 2075 ------Group Group 16,834,418 638,362,439 821,733,216 171,941,451 421,282,405 438,116,822 993,674,668 9,820,318,939 1,431,791,490 10,458,681,378 As at 31 Ashad 2076 As at 31 Ashad 2076 Particulars 4.7.4: Allowances for impairment 4.7.4: Allowances Particulars securities Investment at FVTOCI in equity measured Investment Total Investment securities measured at amortized cost securities measured Investment Specifi c allowances for impairment c allowances Specifi 1 Balance at Shrawan Impairment loss for the year: Charge for the year Charge Recoveries/reversal during the year Recoveries/reversal Write-off s Write-off Exchange rate variance on foreign currency impairment currency variance on foreign Exchange rate Other movement Balance at Ashad end Collective allowances for impairment allowances Collective Balance at Shrawan 1 Balance at Shrawan Impairment loss for the year: Charge/(reversal) for the year Charge/(reversal) Exchange rate variance on foreign currency impairment currency variance on foreign Exchange rate Other movement Balance at Ashad end Total allowances for impairment allowances Total Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year The Investments made by Bank in fi nancial instruments has been presented under this account head in three categories i.e. investment securities designated at fair value through profi t or t profi at fair value through securities designated categories i.e. investment under this account head in three been presented instruments has nancial in fi by Bank made The Investments income. other comprehensive at fair value through in equity measured at amortized cost and investment securities measured loss, investment

52 www.nmbbanknepal.com - - - - 33,306,449 14,392,000 164,265,490 188,718,901 111,022,840 154,819,312 539,086,827 877,676,739 652,132,992 553,478,827 5,479,269,098 2,538,022,061 8,894,967,898 As at 32 Ashad 2075 As at 32 Ashad 2075 Carrying Amount (NPR.) Carrying - - - - NMB NMB 300,000 1,480,000 1,700,000 1,000,000 1,400,000 31,995,900 593,366,539 786,811,382 652,132,992 625,362,439 8,252,044,202 9,690,988,576 Face Value (USD) Value Face As at 31 Ashad 2076 As at 31 Ashad 2076 - - - 4-Dec-19 4-Dec-19 18-Mar-20 18-Mar-20 18-Mar-20 14,088,986 27,392,000 556,919,327 992,676,739 584,311,327 5,479,269,098 2,538,022,061 9,024,056,884 Maturity Date As at 32 Ashad 2075 As at 32 Ashad 2075 - - - Group Group 14,989,953 44,995,900 593,366,539 786,811,382 766,473,402 638,362,439 8,252,044,202 9,820,318,939 3.76% 2.53% 3.77% 3.75% 3.88% Int Rate As at 31 Ashad 2076 As at 31 Ashad 2076 4.8.1: Investment securities measured at amortized cost securities measured 4.8.1: Investment Particulars as follows: as at 31 Ashad 2076 are The details of other investment Description income other comprehensive at fair value through in equity measured 4.8.2: Investment Particulars Total 4. ICICI Bank Dubai 5. Syndicate Bank London 3. ICICI Bank Dubai 2. ICICI Bank Dubai 1. Syndicate Bank London Debt securities Equity instruments Quoted equity securities Government bonds Government Unquoted equity securities Government treasury bills treasury Government Total Nepal Rastra Bank bonds Nepal Rastra Nepal Rastra Bank deposits instruments Nepal Rastra Other Investments Less: speciﬁ c allowances for impairment c allowances Less: speciﬁ Total

NMB Annual Report-2018/19 53 - - - - - 4,392 5,781 5,000 43,710 189,000 411,390 258,600 9,280,000 9,190,000 4,198,000 19,120,000 33,167,151 10,000,000 20,020,000 14,392,000 135,660,000 121,275,000 190,650,803 Fair Value Fair 553,478,827 539,086,827 ------3,600 5,000 189,000 211,300 Cost As at 32 Ashad 2075 4,198,000 10,000,000 20,000,000 10,000,000 40,947,100 10,000,000 14,000,000 14,392,000 140,000,000 105,000,000 209,006,679 549,168,679 563,560,679 - - - NMB 2,644 4,410 5,400 71,600 458,073 246,000 2,000,000 1,890,000 6,045,100 10,180,000 18,800,000 10,280,000 31,242,637 11,989,200 34,382,502 10,000,000 46,046,000 31,995,900 140,420,000 113,610,000 187,688,873 Fair Value Fair 593,366,539 625,362,439 ------3,600 5,000 189,000 211,300 Cost 2,000,000 4,198,000 As at 31 Ashad 2076 10,000,000 20,000,000 10,000,000 40,947,100 10,000,000 34,698,472 10,000,000 37,023,000 26,392,000 140,000,000 105,000,000 209,006,679 606,890,151 633,282,151 - - - - 4,392 5,781 5,000 43,710 189,000 411,390 258,600 9,280,000 9,190,000 2,000,000 4,198,000 19,120,000 33,167,151 10,000,000 11,000,000 20,020,000 27,392,000 144,830,000 129,937,500 190,650,803 Fair Value Fair 556,919,327 584,311,327 ------3,600 5,000 189,000 211,300 As at 32 Ashad 2075 Cost 2,000,000 4,198,000 10,000,000 20,000,000 10,000,000 40,947,100 10,000,000 11,000,000 14,000,000 27,392,000 150,000,000 112,500,000 209,006,679 566,668,679 594,060,679 - Group 2,644 4,410 5,400 71,600 458,073 246,000 2,000,000 2,000,000 1,890,000 6,045,100 10,180,000 18,800,000 10,280,000 31,242,637 11,989,200 11,000,000 34,382,502 10,000,000 46,046,000 44,995,900 140,420,000 113,610,000 187,688,873 Fair Value Fair 593,366,539 638,362,439 - - - - 3,600 5,000 189,000 211,300 Cost As at 31 Ashad 2076 2,000,000 2,000,000 4,198,000 10,000,000 20,000,000 10,000,000 40,947,100 10,000,000 11,000,000 34,698,472 10,000,000 37,023,000 39,392,000 140,000,000 105,000,000 209,006,679 606,890,151 646,282,151 Total Citizen Mutual Fund-I Sanima Equity Fund Grand Total Grand NIC Asia Growth Fund NIC Asia Growth Total Laxmi Equity Fund CEDB Hydro Fund Limited CEDB Hydro NMB Hybrid Fund-1 Nepal Finsoﬅ Company Ltd. Nepal Finsoﬅ NMB Sulav Investment Fund-1 NMB Sulav Investment Samudayak Laghubitta Bittaya Sanstha Ltd Nepal Telecom Forward Community Forward Butwal Power Company Butwal Power NABIL BALANCE FUND-II Mero Micro Finance Bittiya Sanstha Ltd. Finance Micro Mero Citizens Mutual Fund-II Laxmi Laghubitta Sanstha Limited Credit Information Bureau Limited Information Bureau Credit Rural Microﬁ nance Development Center Limited nance Development Microﬁ Rural Nepal clearing House Limited Ridi Hydro Power Limited Power Ridi Hydro Investment in unquoted equity Investment Nepal Stock Exchange Limited Particulars 4.8.3: Information relating to investment in equities to investment 4.8.3: Information relating NLG Insurance Company Limited Insurance NLG Investment in quoted equity Investment Co. (Nepal) Limited United Insurance Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

54 www.nmbbanknepal.com - - - - - 4,392 5,781 5,000 43,710 189,000 411,390 258,600 9,280,000 9,190,000 4,198,000 19,120,000 33,167,151 10,000,000 20,020,000 14,392,000 135,660,000 121,275,000 190,650,803 Fair Value Fair 553,478,827 539,086,827 ------3,600 5,000 189,000 211,300 Cost As at 32 Ashad 2075 4,198,000 10,000,000 20,000,000 10,000,000 40,947,100 10,000,000 14,000,000 14,392,000 140,000,000 105,000,000 209,006,679 549,168,679 563,560,679 - - - NMB 2,644 4,410 5,400 71,600 458,073 246,000 2,000,000 1,890,000 6,045,100 10,180,000 18,800,000 10,280,000 31,242,637 11,989,200 34,382,502 10,000,000 46,046,000 31,995,900 140,420,000 113,610,000 187,688,873 Fair Value Fair 593,366,539 625,362,439 ------3,600 5,000 189,000 211,300 Cost 2,000,000 4,198,000 As at 31 Ashad 2076 10,000,000 20,000,000 10,000,000 40,947,100 10,000,000 34,698,472 10,000,000 37,023,000 26,392,000 140,000,000 105,000,000 209,006,679 606,890,151 633,282,151 - - - - 4,392 5,781 5,000 43,710 189,000 411,390 258,600 9,280,000 9,190,000 2,000,000 4,198,000 19,120,000 33,167,151 10,000,000 11,000,000 20,020,000 27,392,000 144,830,000 129,937,500 190,650,803 Fair Value Fair 556,919,327 584,311,327 ------3,600 5,000 189,000 211,300 As at 32 Ashad 2075 Cost 2,000,000 4,198,000 10,000,000 20,000,000 10,000,000 40,947,100 10,000,000 11,000,000 14,000,000 27,392,000 150,000,000 112,500,000 209,006,679 566,668,679 594,060,679 - Group 2,644 4,410 5,400 71,600 458,073 246,000 2,000,000 2,000,000 1,890,000 6,045,100 10,180,000 18,800,000 10,280,000 31,242,637 11,989,200 11,000,000 34,382,502 10,000,000 46,046,000 44,995,900 140,420,000 113,610,000 187,688,873 Fair Value Fair 593,366,539 638,362,439 - - - - 3,600 5,000 189,000 211,300 Cost As at 31 Ashad 2076 2,000,000 2,000,000 4,198,000 10,000,000 20,000,000 10,000,000 40,947,100 10,000,000 11,000,000 34,698,472 10,000,000 37,023,000 39,392,000 140,000,000 105,000,000 209,006,679 606,890,151 646,282,151 Total Citizen Mutual Fund-I Sanima Equity Fund Grand Total Grand NIC Asia Growth Fund NIC Asia Growth Total Laxmi Equity Fund CEDB Hydro Fund Limited CEDB Hydro NMB Hybrid Fund-1 Nepal Finsoﬅ Company Ltd. Nepal Finsoﬅ NMB Sulav Investment Fund-1 NMB Sulav Investment Samudayak Laghubitta Bittaya Sanstha Ltd Nepal Telecom Forward Community Forward Butwal Power Company Butwal Power NABIL BALANCE FUND-II Mero Micro Finance Bittiya Sanstha Ltd. Finance Micro Mero Citizens Mutual Fund-II Laxmi Laghubitta Sanstha Limited Credit Information Bureau Limited Information Bureau Credit Rural Microfi nance Development Center Limited nance Development Microfi Rural Nepal clearing House Limited Ridi Hydro Power Limited Power Ridi Hydro Investment in unquoted equity Investment Nepal Stock Exchange Limited Particulars 4.8.3: Information relating to investment in equities to investment 4.8.3: Information relating NLG Insurance Company Limited Insurance NLG Investment in quoted equity Investment Co. (Nepal) Limited United Insurance under fair value reserve heading. heading. (NICGF)-1 nancial assets held to maturity instrument as the Bank has intention and capacity hold these instruments until ed as fi been classifi bonds and USD Bonds have bills, Government reserve Treasury Fund on these bonds adequately com- xed return Bank considers that the fi issued by the government. at amortised costs. These instruments are carried their maturity. These instruments are accrued Interest accordingly. been measured for the EIR calculation and balance outstanding have considered Bonds are paid on development pensates for associated risks. Premiums Fund-1 as part of the Investments. shown are Bonds and T-Bills on Development value in fair ed as available for sale assets. The movement been classifi have entities. These investments the invested Growth uence over cant infl or signifi in control result None of the equity investments income. other comprehensive value of these instruments has been adjusted through Hybrid fair Fund-1 and NPR 140,000,000 in NMB Hybrid as Seed Capital. For both Mutual Funds, the Bank is Fund NPR 105,000,000 in NMB Sulav Investment The Bank has invested Asia of “Mutual Fund Regulation 2067” issued by the been made as per the requirement have These investment Subsidiary NMB Capital Limited is the Fund Manager. Sponsor while the Bank’s is recognized at FVTOCI nancial assets measured net change in the fair value of fi The cumulative seed money by the Fund Sponsor/Manager. of Nepal (SEBON) to invest Securities Board NMB under NIC are: years threee that has not distributed any dividend since previous Investments 1. 2.

NMB Annual Report-2018/19 55 - 4.9 633,132,526 130,752,238 824,302,920 763,884,764 824,302,920 As at 32 Ashad 2075 - - NMB 956,949,945 992,528,515 956,949,945 992,528,515 As at 31 Ashad 2076 - - 77,848 8,129,427 948,820,518 992,528,515 732,387,644 130,752,238 923,191,366 863,139,882 923,191,366 (35,656,418) Amount (NPR) As at 32 Ashad 2075 - - Group 1,062,454,150 1,100,493,938 1,062,454,150 1,100,493,938 As at 31 Ashad 2076 The advance deposited by the bank less tax liabilities are presented under this head: presented The advance deposited by the bank less tax liabilities are Particulars Current tax assets Current below: of Advance tax as Ashad end 2076 is given The movement Particulars A. Advance Income Tax carried forward from previous year previous from forward carried A. Advance Income Tax B. Advance Tax Instalments FY 2075/76 B. Advance Tax FY 2075/76 by Withholder Withheld C. Tax Deposit for legal cases to Tax transferred D. Tax for Income tax FY 2075/76 E. Provision Payable (A+B+C-D-E) Net Tax Current tax assets Current income tax assets year Current Tax assets of prior periods Tax Total Current tax Assets Current Total Current tax liabilities Current income tax liabilities year Current Tax liabilities of prior periods Tax Total Current tax Liabilities Current Total Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year The advance tax amount NPR. 77,848 has been transferred to Tax Deposit for legal cases aﬅ er the reporting period. The three advance tax installments are within the limit of 90% total advance tax installments are period. The three er the reporting Deposit for legal cases aﬅ to Tax The advance tax amount NPR. 77,848 has been transferred cit has been deposited within Ashwin end 2076. tax liability and the deﬁ

56 www.nmbbanknepal.com 48,552,000 48,552,000 200,000,000 200,000,000 Fair Value Fair Value Fair As at 32 Ashad 2075 As at 32 Ashad 2075 48,552,000 48,552,000 200,000,000 200,000,000 Cost Cost - NMB NMB 51% 4.10 100% 48,552,000 48,552,000 48,552,000 200,000,000 200,000,000 248,552,000 200,000,000 248,552,000 Fair Value Fair Value Fair As at 32 Ashad 2075 As at 32 Ashad 2075 - NMB NMB 51% 100% As at 31 Ashad 2076 As at 31 Ashad 2076 48,552,000 48,552,000 48,552,000 200,000,000 200,000,000 200,000,000 248,552,000 248,552,000 Cost Cost Percentage of ownership held by the Bank of ownership Percentage As at 31 Ashad 2076 As at 31 Ashad 2076 NMB Capital Limited Investment in subsidiaries Investment in quoted subsidiaries 4.10.1: Investment Particulars in unquoted subsidiaries 4.10.2: Investment Particulars to subsidiaries of the Bank 4.10.3: Information relating Particulars Particulars in quoted subsidiaries Investment NMB Micro Finance Bittiya Sastha Limited Finance NMB Micro NMB Micro Finance Bittiya Sastha Limited, 826,231 Promoter Bittiya Sastha Limited, 826,231 Promoter Finance NMB Micro of Rs 100 each fully paid up shares of Rs 100 each shares NMB Capital Ltd., 2,000,000 Ordinary fully paid up Investment in unquoted subsidiaries Investment Total Total Total investment Total Less: Impairment allowances Net carrying amount Net carrying

NMB Annual Report-2018/19 57 - - - - - 4.11 Cost As at 32 Ashad 2075 As at 32 Ashad 2075 - - - - - NMB NMB Fair Value Fair As at 31 Ashad 2076 As at 31 Ashad 2076 - - - - - 49% 726,619 20,273,815 131,480,054 Fair Value Fair As at 32 Ashad 2075 As at 32 Ashad 2075 As at 32 Ashad 2075 - - - - - Group Group Group 49% 544,964 34,831,103 165,396,616 Cost As at 31 Ashad 2076 As at 31 Ashad 2076 As at 31 Ashad 2076 The Bank do not have any investment in associates as of fi scal year end 2076. scal year in associates as of fi any investment The Bank do not have Particulars 4.10.4: Non controlling interest of the subsidiaries interest 4.10.4: Non controlling Particulars in associates Investment in quoted associates 4.11.1: Investment Particulars Equity interest held by NCI (%) Equity interest Profi t/(loss) allocated during the year Profi Investment in quoted associates Investment Accumulated balances of NCI as on year end Accumulated balances of NCI as on year Investment in unquoted associates Investment "…………………………………….Ltd. of Rs. …….each" …………shares "…………………………………….Ltd. of Rs. …….each" …………shares ………………………………. Total Dividend paid to NCI Total investment Total Less: Impairment allowances Net carrying amount Net carrying Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

58 www.nmbbanknepal.com Cost As at 32 Ashad 2075 As at 32 Ashad 2075 NMB NMB Fair Value Fair Percentage of ownership held by the Bank of ownership Percentage As at 31 Ashad 2076 As at 31 Ashad 2076 Fair Value Fair As at 32 Ashad 2075 As at 32 Ashad 2075 As at 32 Ashad 2075 Group Group Group Cost Percentage of ownership held by the Bank of ownership Percentage As at 31 Ashad 2076 As at 31 Ashad 2076 As at 31 Ashad 2076 …………………………………….Ltd. …………………………………….Ltd. ………………………………. Total …………………………………….Ltd. …………………………………….Ltd. …………………………………….Ltd. …………………………………….Ltd. ……………………………. 4.11.2: Investment in unquoted associates 4.11.2: Investment Particulars to associates of the Bank 4.11.3: Information relating Particulars 4.11.4: Equity value of associates Particulars "…………………………………….Ltd. of Rs. …….each" …………shares "…………………………………….Ltd. of Rs. …….each" …………shares ………………………………. Total

NMB Annual Report-2018/19 59 ------4.12 77,488,827 59,774,627 (17,714,200) As at 32 Ashad 2075 ------NMB 59,774,627 43,141,235 102,915,862 As at 31 Ashad 2076 ------77,488,827 59,774,627 (17,714,200) As at 32 Ashad 2075 ------Group 59,774,627 43,141,235 102,915,862 As at 31 Ashad 2076 Particulars Investment properties Investment Investment properties measured at fair value measured properties Investment 1 Balance as on Shrawan Addition/disposal during the year Net changes in fair value during the year Adjustment/transfer Net amount Investment properties measured at cost measured properties Investment 1 Balance as on Shrawan Addition/disposal during the year Adjustment/transfer Accumulated depreciation Accumulated impairment loss Net amount Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year As per NAS 40 ‘Investment Property’ (land and building acquired as non banking assets) are measured at fair value. measured as non banking assets) are (land and building acquired Property’ As per NAS 40 ‘Investment ed as Plant and Equipment”; assets classiﬁ and equipment under NAS 16 – “Property, ed as property land or building both other than those classiﬁ are properties Investment all land or and property as investment has recognized The Group Assets Held for Sale and Discontinued Operations”. assets held for sale under NFRS 5 – “Non-Current non-current as non banking assets. building acquired

60 www.nmbbanknepal.com 72,000 785,000 466,000 5,354,000 2,200,000 6,612,125 4,041,500 3,120,000 4,650,384 1,574,853 3,745,000 13,936,000 15,530,000 20,134,000 20,695,000 102,915,862 Amount (NPR) 7-Jan-19 9-Jan-19 9-Jan-19 9-Feb-18 1-Feb-19 1-Feb-19 8-Feb-19 4-Sep-18 4-Mar-18 1-Mar-19 16-Jul-15 15-Jul-18 13-Jan-19 18-Jun-18 16-Nov-17 Date NBA is assumed Party's Name 1. Kipu Quality Meat Products P. Ltd. P. 1. Kipu Quality Meat Products 2. Kamdhenu Mahila Dugdha Utpadak Ssl 3. Ankita Impex 4. Jalthal Live Stock P. Ltd Stock P. 4. Jalthal Live 5. Factory Outlet And Clothing Store 5. Factory 6. China Hygienic Meat Pro & Sup P.Ltd 6. China Hygienic Meat Pro 7. China Hygienic Meat Pro & Sup P.Ltd 7. China Hygienic Meat Pro 8. Eastern Shoe Centre 9. Chandrakala Limbang 9. Chandrakala 10. Mauni Traders 11. National Solar & Investment 12. Ujjwal Trading & Supplier 12. Ujjwal Trading 13. Babu Rai 14. Rtc-Teechnology Nepal 14. Rtc-Teechnology 15. Evergreen Total The details of Non-Banking Assets as of Ashad end, 2076 are as follows: The details of Non-Banking Assets as Ashad end, 2076 are

NMB Annual Report-2018/19 61 ------4.13 Total 174,082,276 590,861,398 148,876,654 213,499,910 283,700,200 (39,665,986) (29,247,691) (34,807,238) (56,851,854) 2,055,943,249 844,906,652 710,490,362 1,594,345,849 2,304,836,211 2,461,484,267 1,465,081,851 1,616,577,616 ------4,127 (81,767) 8,795,393 7,687,696 3,789,800 Others 69,402,283 12,481,750 (1,660,232) 85,803,604 32,440,181 35,655,769 30,654,304 77,008,212 101,842,463 112,663,981 116,457,908 Equipment & ------(818,777) (853,351) 43,221,296 37,636,030 53,524,035 90,594,152 133,915,044 269,179,706 (13,220,338) (13,282,797) Machinery 200,733,254 135,264,662 198,428,490 188,160,325 158,330,735 346,491,060 399,161,745 ------(12,598) (133,851) (157,410) 9,254,768 6,948,581 Fixture 51,059,993 13,239,011 72,360,254 22,826,621 67,129,490 21,300,261 41,126,387 37,154,742 57,874,722 95,029,465 Furniture & Furniture 108,255,877 ------60,912,326 53,524,107 86,321,157 65,719,950 Vehicles 114,167,278 285,096,087 Group (38,847,209) (14,993,148) (50,402,599) (18,692,296) 170,928,809 174,763,353 193,278,946 179,425,504 152,698,237 332,123,741 368,042,299 ------(1,139) (12,903) 23,202,347 19,280,860 91,950,331 34,135,744 22,863,614 59,690,574 74,192,684 63,272,190 151,640,906 134,433,538 111,231,191 174,503,381 208,626,222 Accessories Computer & ------(8,525) (818,586) 24,593,007 19,768,722 96,164,598 20,917,698 63,048,482 (1,013,363) 87,363,468 183,528,066 Leasehold 139,707,741 126,764,617 130,448,451 115,114,734 245,563,185 266,472,358 Properties ------4,103,140 4,030,658 1,572,465 6,165,630 34,201,872 42,335,671 38,232,531 162,658,358 Building 128,456,486 128,060,782 130,591,458 168,823,988 170,396,453 ------Land (5,566,005) 829,637,410 829,637,410 824,071,405 829,637,410 829,637,410 824,071,405 Particulars Capital Work in Progress Capital Work Net Book Value As on Ashad end 2074 Adjustment As on Ashad end 2076 As on Ashad end 2076 Depreciation charge for the Year charge Depreciation Impairment for the year Disposals As on Ashad end 2075 Adjustment As on Ashad end 2075 Depreciation charge for the Year charge Depreciation Impairment for the year Disposals Depreciation and Impairment Depreciation 1, 2074 As on Shrawan Adjustment/Revaluation Balance as on Ashad end 2075 Addition during the Year Acquisition Capitalization Disposal during the year Adjustment/Revaluation Balance as on Ashad end 2076 Addition during the Year Acquisition Capitalization Disposal during the year Cost 1, 2074 As on Shrawan Property and Equipment Property Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

62 www.nmbbanknepal.com ------Total 163,692,664 141,841,503 199,177,763 268,775,840 (39,665,986) (29,247,691) (56,821,955) (33,231,560) 2,005,009,644 805,011,027 680,984,350 568,390,538 2,240,553,924 1,577,898,704 1,436,619,106 1,559,569,574 2,382,909,732 ------(81,767) (88,300) 8,710,194 8,537,299 3,627,320 Others 99,652,107 12,481,750 85,570,907 31,246,927 35,184,845 30,101,971 76,860,712 68,405,181 115,672,877 112,045,557 Equipment & - - - - - (818,777) (853,351) 43,221,296 37,636,030 53,524,035 90,594,152 269,179,706 (13,220,338) (13,282,797) Machinery 200,733,254 135,264,662 188,160,325 198,428,490 158,330,735 399,161,745 133,915,044 346,491,060 ------(133,851) (154,803) 6,536,260 4,669,185 8,574,593 Fixture 56,685,551 19,261,613 54,402,647 13,354,497 27,925,972 29,964,306 47,866,388 84,366,953 43,331,054 75,792,360 Furniture & Furniture - - - - - 57,375,668 50,550,127 84,545,157 59,274,670 Vehicles NMB 269,946,485 (38,847,209) (14,993,148) (50,402,599) (18,692,296) 161,625,339 162,406,583 166,650,734 182,264,834 143,878,125 344,671,417 108,321,146 310,528,859 ------19,774,897 17,211,689 27,173,070 18,059,946 54,385,123 55,233,381 62,631,554 87,566,169 141,951,293 124,552,755 104,777,858 187,184,309 160,011,239 Accessories Computer & ------(818,586) 23,971,209 19,206,515 20,161,123 62,938,078 (1,013,363) 82,648,662 92,650,073 175,298,735 Leasehold 135,009,210 126,185,448 122,375,362 111,038,002 257,384,573 237,223,450 Properties ------4,103,140 4,030,658 1,572,465 6,165,630 42,335,671 38,232,531 34,201,872 162,658,358 Building 128,456,486 130,591,458 128,060,782 170,396,453 168,823,988 ------Land (5,566,005) 829,637,410 829,637,410 829,637,410 824,071,405 824,071,405 829,637,410 Particulars Capital Work in Progress Capital Work Net Book Value As on Ashad end 2074 Adjustment As on Ashad end 2076 Depreciation charge for the Year charge Depreciation Impairment for the year Disposals As on Ashad end 2075 As on Ashad end 2076 Adjustment As on Ashad end 2075 Depreciation charge for the Year charge Depreciation Impairment for the year Disposals Adjustment/Revaluation Balance as on Ashad end 2076 and Impairment Depreciation 1, 2074 As on Shrawan Addition during the Year Acquisition Capitalization Disposal during the year Adjustment/Revaluation Balance as on Ashad end 2075 Addition during the Year Acquisition Capitalization Disposal during the year Cost 1, 2074 As on Shrawan

NMB Annual Report-2018/19 63 ------4.14 6,194,294 47,134,420 12,753,198 31,049,514 13,587,223 59,887,619 37,243,808 50,831,031 16,084,906 22,643,811 107,616,583 167,504,201 116,673,171 Total ------Other ------Group Developed ------So ware So 6,194,294 13,587,223 47,134,420 12,753,198 31,049,514 59,887,619 37,243,808 50,831,031 16,084,906 22,643,811 107,616,583 167,504,201 116,673,171 Purchased ------Goodwill Addition during the Year Disposal during the year Addition during the Year Acquisition Disposal during the year for the Year Amortization charge for the Year Amortization charge Impairment for the year Cost 1, 2074 As on Shrawan Acquisition Capitalization Adjustment/Revaluation Balance as on Ashad end 2075 Capitalization Adjustment/Revluation Balance as on Ashad end 2076 Amortization and Impairment 1, 2074 As on Shrawan Impairment for the year Disposals Adjustment As on Ashad end 2075 Disposals Adjustment As on Ashad end 2076 in Progress Capital Work Net Book Value As on Ashad end 2074 As on Ashad end 2075 As on Ashad end 2076 Particulars Goodwill and Intangible Assets Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

64 www.nmbbanknepal.com ------5,853,735 45,886,627 12,210,798 30,189,482 13,100,691 58,097,426 36,043,217 49,143,908 15,697,146 22,054,209 106,455,282 164,552,707 115,408,800 Total ------Other ------NMB Developed ------So ware So 5,853,735 45,886,627 12,210,798 30,189,482 13,100,691 58,097,426 36,043,217 49,143,908 15,697,146 22,054,209 106,455,282 164,552,707 115,408,800 Purchased ------Goodwill Addition during the Year Disposal during the year Disposal during the year for the Year Amortization charge Impairment for the year Particulars Cost 1, 2074 As on Shrawan Acquisition Capitalization Adjustment/Revaluation Balance as on Ashad end 2075 Addition during the Year Acquisition Capitalization Adjustment/Revluation Balance as on Ashad end 2076 Amortization and Impairment 1, 2074 As on Shrawan Impairment for the year Disposals Adjustment As on Ashad end 2075 for the Year Amortization charge Disposals Adjustment As on Ashad end 2076 in Progress Capital Work Net Book Value As on Ashad end 2074 As on Ashad end 2075 As on Ashad end 2076

NMB Annual Report-2018/19 65 - - - - - 4.15 267,656 9,078,445 8,271,373 5,172,714 1,016,836 3,389,813 3,171,581 70,040,593 66,650,780 198,629,898 (66,869,011) (3,439,237) (Liabilities) Tax Assets/ Tax Net Deferred Net Deferred - - - - 34,147,985 (1,016,836) NMB 927,364,825 1,693,307,503 1,364,777,431 Liabilities Deferred Tax Tax Deferred - - Year ended 31 Ashad 2076 Year 9,078,445 8,271,373 3,389,813 34,147,985 198,629,898 Assets 994,015,605 1,698,480,217 1,364,777,431 Deferred Tax Tax Deferred - - - - 322,258 384,793 9,078,445 8,271,373 1,492,290 3,389,813 15,074,704 65,559,281 62,169,468 217,064,310 (64,066,990) (42,579,530) (1,877,083) (Liabilities) Tax Assets/ Tax Net Deferred Net Deferred - - - - - (322,258) 34,147,985 Group 948,089,076 1,719,114,233 1,407,356,962 Liabilities Deferred Tax Tax Deferred - - Year ended 31 Ashad 2076 Year 9,078,445 8,271,373 3,389,813 34,147,985 217,064,310 Assets 1,734,188,938 1,364,777,431 1,010,258,544 Deferred Tax Tax Deferred Deferred tax due to changes in rate Deferred Net Deferred tax asset/(liabilities) as on 31 Ashad 2076 Net Deferred during the year Origination/(Reversal) Deferred tax (asset)/liabilities as on 32 Ashad 2075 Deferred Deferred tax on carry forward of unused tax losses forward tax on carry Deferred Deferred tax on temporory diff erences diff tax on temporory Deferred Provisions Lease liabilities Employees' defi ned benefi t plan ned benefi defi Employees' Property & equipment Property Investment securities Investment Investment properties Investment Loans and advances to customers Deferred tax on temporory diff erences on following items on following erences diff tax on temporory Deferred Loan and Advance to B/FIs Deferred tax expense/(income) recognised in directly in directly tax expense/(income) recognised Deferred in equity Deferred tax expense/(income) recognised in other tax expense/(income) recognised Deferred income comprehensive The creation of Deferred Tax Assets (DTA) and Deferred Tax Liabilities (DTL) has a bearing on the computation of capital adequacy ratio and banks’ ability to declare dividends. DTA dividends. DTA and banks’ ability to declare Liabilities (DTL) has a bearing on the computation of capital adequacy ratio Tax and Deferred Assets (DTA) Tax of Deferred The creation taxable against assets future losses which can set-off forward amount as per books of accounts and tax including carry carrying between erence diff unabsorbed depreciation, represents nition of income taxes and meet the defi prepaid income tax payments which indicates that they are future ect of decreasing has an eff DTA erence. as timing diff income which is considered of Nepal Accounting as per the provision been recognised tax (assets)/liabilities have Deferred thereon. is included already tax reserve I capital, if deferred Tier is deducted from assets. DTA (NAS -09) Standard Particulars Deferred Tax Deferred t or loss in profi tax expense/(income) recognised Deferred Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

66 www.nmbbanknepal.com - - - - - 3,389,813 5,544,336 69,197,225 66,869,011 63,479,198 151,214,591 124,994,248 (10,381,221) (59,774,627) (18,972,501) (Liabilities) (136,066,237) (117,093,734) Tax Assets/ Tax Net Deferred Net Deferred - - - - 10,381,221 59,774,627 NMB 751,986,372 616,075,667 1,231,443,337 Liabilities Deferred Tax Tax Deferred - - - Year ended 32 Ashad 2075 Year 3,389,813 5,544,336 151,214,591 876,980,620 Assets 679,554,865 1,231,443,337 Deferred Tax Tax Deferred - - - - 3,389,813 4,959,770 72,033,510 64,066,990 60,677,178 164,991,006 133,023,057 (10,713,721) (59,774,627) (28,115,179) (19,728,403) (Liabilities) (136,100,499) (116,372,096) Tax Assets/ Tax Net Deferred Net Deferred - - - 584,566 10,713,721 59,774,627 787,367,827 Group 634,672,978 1,259,558,516 Liabilities Deferred Tax Tax Deferred - - - - Year ended 32 Ashad 2075 Year 5,544,336 164,991,006 920,390,884 Assets 695,366,781 1,231,443,337 Deferred Tax Tax Deferred Deferred tax due to changes in rate Deferred tax asset/(liabilities) as on 32 Ashad 2075 Net Deferred Deferred tax (asset)/liabilities as on 31 Ashad 2074 Deferred during the year Origination/(Reversal) Deferred tax on carry forward of unused tax losses forward tax on carry Deferred Deferred tax on temporory diff erences diff tax on temporory Deferred Provisions Lease liabilities Employees' defi ned benefi t plan ned benefi defi Employees' Property & equipment Property Investment securities Investment Investment properties Investment Loans and advances to customers Deferred tax on temporory diff erences on following items on following erences diff tax on temporory Deferred Loan and Advance to B/FIs Deferred tax expense/(income) recognised in other tax expense/(income) recognised Deferred income comprehensive Deferred tax expense/(income) recognised in directly in in directly tax expense/(income) recognised Deferred equity Particulars t or loss in profi tax expense/(income) recognised Deferred

NMB Annual Report-2018/19 67 - - - - - 4.16 34,255 208,124 30,334,128 12,434,921 42,388,619 63,703,616 18,771,774 38,222,000 451,037,186 3,801,249,279 4,458,383,903 As at 32 Ashad 2075 ------NMB 392,868 29,268,898 16,847,224 72,749,604 63,703,616 17,771,668 32,513,857 739,878,746 228,747,129 1,201,873,611 As at 31 Ashad 2076 - - - - - 34,255 1,220,655 12,434,921 43,227,751 63,703,616 19,736,719 38,222,000 478,188,664 451,037,186 3,801,249,279 4,909,055,046 As at 32 Ashad 2075 ------Group 1,177,807 55,465,547 16,847,224 72,841,593 63,703,616 18,718,339 32,513,857 739,878,746 228,747,129 1,229,893,858 As at 31 Ashad 2076 Other Asset include accounts receivable, interest receivable, accrued income, prepayments, deposit, deferred employee benefi ts and stationery stock details presented as follows: ts and stationery stock details presented benefi employee deposit, deferred accrued income, prepayments, receivable, interest Other Asset include accounts receivable, Particulars Other assets Assets held for sale Other non banking assets Bills receivable Accounts receivable Accrued income Prepayments and deposit Prepayments Income tax deposit Deferred employee expenditure employee Deferred Others: Advance Gold and Silver Stock of Stationery Fuel Stock Gold Markup Advance to CBS Project Receivable from FPO shareholders - Share Allotment - Share FPO shareholders Receivable from Others Total Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year The provision outstanding as of Ashad end 2076 of NMB includes IPO receivables of erstwhile Bank of Asia and deposit of capital merchant fi nance amounting NPR. 5,544,336 and fi of erstwhile Bank Asia and deposit capital merchant outstanding as of Ashad end 2076 NMB includes IPO receivables The provision and Cash Equivalent respectively. with receivables netted off and are NPR. 3,534,109 respectively

68 www.nmbbanknepal.com ------4.17 4.18 660,071,641 500,000,000 536,268,951 660,071,641 1,036,268,951 As at 32 Ashad 2075 As at 32 Ashad 2075 ------NMB NMB 585,303,362 624,364,996 624,364,996 2,618,219,710 3,203,523,072 As at 31 Ashad 2076 As at 31 Ashad 2076 ------660,071,641 500,000,000 536,268,951 660,071,641 1,036,268,951 As at 32 Ashad 2075 As at 32 Ashad 2075 ------Group Group 585,303,362 624,364,996 624,364,996 2,618,219,710 3,203,523,072 As at 31 Ashad 2076 As at 31 Ashad 2076 Particulars Particulars Due to Bank and Financial Institutions Due to Bank and Financial Bank Due to Nepal Rastra Money market deposits Money market NRB nance from Refi Interbank borrowing Standing Liquidity Facility Other deposits from BFIs Other deposits from NRB facility from Lender of last report Settlement and clearing accounts agreements Securities sold under repurchase Other deposits from BFIs Other deposits from Other payable to NRB Total Total The Bank has an outstanding borrowing of NPR 585,303,362 (Schedule 4.18) from the Central Bank under Refi nancing Facility available to Financial Institutions. The other payable to NRB available to Financial nancing Facility Bank under Refi the Central of NPR 585,303,362 (Schedule 4.18) from The Bank has an outstanding borrowing at amortised cost. Bank is subsequently measured bodies. Due to Nepal Rastra of Government is payable of Li.Ka Accounts (contra)

NMB Annual Report-2018/19 69 - - - - - 4.19 4.20 782,480,798 184,616,311 216,768,673 1,382,071,887 7,641,835,785 5,312,931,206 4,605,900,471 5,626,605,019 23,671,918,142 22,161,841,630 19,861,381,189 7,477,483,892 83,970,867,219 As at 32 Ashad 2075 As at 32 Ashad 2075 - - - - - NMB NMB 556,846,777 188,742,494 117,679,219 1,886,751,200 9,045,528,330 6,014,776,452 5,494,378,104 5,795,411,079 28,370,801,308 21,034,039,618 27,845,721,815 8,458,374,429 97,892,301,967 As at 31 Ashad 2076 As at 31 Ashad 2076 ------782,480,798 184,616,311 216,768,673 1,382,071,887 7,573,942,659 5,312,931,206 4,605,900,471 5,626,605,019 23,581,918,142 22,161,841,630 20,557,909,842 7,477,483,892 84,509,502,746 As at 32 Ashad 2075 As at 32 Ashad 2075 ------Group Group 556,846,777 188,742,494 117,679,219 1,886,751,200 8,951,169,615 6,014,776,452 5,494,378,104 5,795,411,079 28,320,801,308 21,034,039,618 28,928,443,210 8,458,374,429 98,830,664,647 As at 31 Ashad 2076 As at 31 Ashad 2076 Particulars bank and NRB) nancial institutions (local and foreign bank and fi All deposits account other than deposit from Particulars Derivative fi nancial instruments fi Derivative customers Deposits from Held for trading swap rate Interest Institutions customers: deposits Term Currency swap Currency Call deposits Forward exchange contract Forward deposits Current Others Other Held for risk management Individual customers: deposits Term Interest rate swap rate Interest Saving deposits Currency swap Currency Current deposits Current Forward exchange contract Forward Other Other Total Total Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year Derivatives are fi nancial instruments that derive their value in response to changes in interest rates, fi nancial instrument prices etc. Derivatives are categorised as trading unless they are unless they are categorised as trading are nancial instrument prices etc. Derivatives fi rates, to changes in interest their value in response nancial instruments that derive fi are Derivatives t or in the Statement of Profi gains or losses recognised at fair value, with all trading and subsequently measured initially recognised are designated as hedging instruments. All derivatives date. ruling on the reporting rates market value is determined using the forward Income. Fair Loss under Net trading

70 www.nmbbanknepal.com ------4.21 1,556,323 31,385,378 39,565,485 189,152,396 2,155,435,584 81,553,772,054 83,970,867,219 As at 32 Ashad 2075 As at 32 Ashad 2075 ------NMB NMB 8,288,556 9,481,223 24,019,388 183,800,655 4,222,411,207 3,468,060,000 1,098,259,906 92,346,041,033 3,468,060,000 3,468,060,000 97,892,301,967 As at 31 Ashad 2076 As at 31 Ashad 2076 ------1,556,323 31,385,378 39,565,485 189,152,396 1,182,081,898 2,155,435,584 82,092,407,581 1,182,081,898 1,182,081,898 84,509,502,746 As at 32 Ashad 2075 As at 32 Ashad 2075 - - - - - Group Group 8,288,556 9,481,223 24,019,388 183,800,655 1,360,240,209 4,222,411,207 3,468,060,000 1,098,259,906 93,284,403,713 1,360,240,209 3,468,060,000 4,828,300,209 98,830,664,647 As at 31 Ashad 2076 As at 31 Ashad 2076 The bank has brought oﬀ shore borrowing amounting USD 15 Mio. from International Financial Corporation(IFC), USD 15 Mio. from CDC Group, London and NPR. 169.56 Mio. from Micro Micro London and NPR. 169.56 Mio. from CDC Group, USD 15 Mio. from Corporation(IFC), International Financial amounting USD 15 Mio. from borrowing shore oﬀ The bank has brought small and medium enterprises bonds, S.A, Luxembourg. Particulars 4.20.1: Currency wise analysis of deposit from customers wise analysis of deposit from 4.20.1: Currency Particulars Borrowing Domestic Borrowing Nepal Government Nepalese rupee Other Institutions Indian rupee Other United State dollar Sub total Great Britain pound Great Foreign Borrowing Foreign Institutions Bank and Financial Foreign Euro Multilateral Development Banks Development Multilateral Japenese yen Other Institutions Chinese yuan Sub total Other Total Total

NMB Annual Report-2018/19 71 ------4.22 As at 32 Ashad 2075 As at 32 Ashad 2075 ------NMB NMB As at 31 Ashad 2076 As at 31 Ashad 2076 ------73,556 73,556 73,556 73,556 As at 32 Ashad 2075 As at 32 Ashad 2075 ------Group Group 73,556 14,999 135,665 224,219 224,219 224,219 As at 31 Ashad 2076 As at 31 Ashad 2076 Particulars Provisions in provision 4.22.1: Movement Particulars Provisions for redundancy Provisions Balance at Shrawan 1 Balance at Shrawan Provision for restructuring Provision Provisions made during the year Provisions Pending legal issues and tax litigation Provisions used during the year Provisions Onerous contracts Onerous Provisions reversed during the year reversed Provisions Other Unwind of discount Total Balance at Ashad end Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

72 www.nmbbanknepal.com - - - - 4.23 6,359,178 1,118,700 60,864,641 82,605,302 98,397,763 12,317,367 515,281,016 221,604,523 285,146,674 122,304,636 1,405,999,800 As at 32 Ashad 2075 - - - NMB 5,128,793 8,271,373 1,118,700 59,445,250 97,620,487 38,531,865 128,750,654 923,806,589 419,841,689 360,889,315 102,551,154 2,145,955,868 As at 31 Ashad 2076 - - 9,540 6,359,178 2,925,180 1,258,075 72,462,163 86,044,161 98,397,763 12,317,367 21,870,778 914,528,161 221,604,523 299,473,585 134,366,091 1,871,616,566 As at 32 Ashad 2075 - Group 1,028,442 2,233,207 5,128,793 8,271,373 1,258,075 73,230,653 97,620,487 38,556,051 32,194,889 138,853,762 419,841,689 379,065,397 103,798,365 1,374,872,190 2,675,953,373 As at 31 Ashad 2076 Particulars Other liabilities Liability for employees defi ned benefi t obligations ned benefi defi Liability for employees Liability for long-service leave Short-term employee benefi ts benefi Short-term employee Bills payable Creditors and accruals Creditors Interest payable on deposit Interest Interest payable on borrowing Interest Liabilities on defered grant income grant Liabilities on defered Unpaid Dividend Liabilities under Finance Lease Liabilities under Finance Employee bonus payable Employee Others: TDS Payable Audit Fee Payable Others Total

NMB Annual Report-2018/19 73 83,378,260 191,683,809 275,062,069 130,819,168 144,242,901 275,062,069 As at 32 Ashad 2075 NMB 130,414,488 257,307,396 387,721,884 197,862,146 189,859,738 387,721,884 As at 31 Ashad 2076 93,251,053 191,683,809 284,934,862 130,819,168 144,242,901 284,934,862 As at 32 Ashad 2075 Group 153,625,139 257,307,396 410,932,535 197,862,146 189,859,738 410,932,535 As at 31 Ashad 2076 4.23.1: Defi ned benefi t obligations ned benefi 4.23.1: Defi fund contri- ned contribution plan as provident a defi unit method. The Bank operates t obligation is calculated annually by an independent actuary using the projected ned-benefi The defi an independently ned contribution plan, the Bank pays contributions to rules. For defi under its staff payment requirement Gratuity t plan for the ned benefi defi and bution of its employees Such assets. plan of value fair the less obligation t expenses. The Bank has no further payment obligations once the contributions have to operating charged fund on a mandatory basis, and such amounts are retirement administered benefi ned defi the of value present the is statement nancial fi the in recognised liability the plans, t benefi ned defi funded For paid. been estimated on the basis of actuarial assumptions. obligations are as follows: nancial position are in the statement of fi The amounts recognised Particulars Present value of unfunded obligations Present Present value of funded obligations Present Total present value of obligations present Total Fair value of plan assets Fair Present value of net obligations Present Recognised liability for defi ned benefi t obligations ned benefi Recognised liability for defi Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

74 www.nmbbanknepal.com - - - - 36,237,227 52,817,322 (9,706,097) 195,713,617 130,819,168 275,062,069 130,819,168 As at 32 Ashad 2075 As at 32 Ashad 2075 - - - - NMB NMB 25,980,978 387,721,884 275,062,069 104,408,657 197,862,146 (17,729,820) 197,862,146 As at 31 Ashad 2076 As at 31 Ashad 2076 - - - - 34,005,777 58,624,966 284,934,862 204,297,939 130,819,168 (11,993,820) 130,819,168 As at 32 Ashad 2075 As at 32 Ashad 2075 - - - - Group Group 27,201,771 410,932,535 294,791,246 107,899,609 197,862,146 (18,960,091) 197,862,146 As at 31 Ashad 2076 As at 31 Ashad 2076 4.23.2: Plan assets Particulars t obligations ned benefi value of defi in the present 4.23.3: Movement Particulars Plan assets comprise 1 t obligations at Shrawan ned benefi Defi Equity securities Actuarial losses Benefi ts paid by the plan Benefi Government bonds Government Current service costs and interest service costs and interest Current Bank deposit Defi ned benefi t obligations at Ashad end ned benefi Defi Other Total

NMB Annual Report-2018/19 75 - - - 37,033,544 61,025,096 26,994,156 74,780,285 (4,986,213) 64,027,700 (17,480,123) 130,819,168 (17,480,123) As at 32 Ashad 2075 As at 32 Ashad 2075 As at 32 Ashad 2075 - - NMB NMB NMB (888,969) (888,969) 81,051,928 32,469,867 60,864,641 15,597,885 (9,419,548) 130,819,168 113,521,795 197,862,146 As at 31 Ashad 2076 As at 31 Ashad 2076 As at 31 Ashad 2076 - - - 40,208,342 61,025,096 27,617,124 74,780,285 (4,986,213) 67,825,466 (17,325,022) 130,819,168 (17,325,022) As at 32 Ashad 2075 As at 32 Ashad 2075 As at 32 Ashad 2075 - - Group Group Group 81,836,905 34,162,523 60,864,641 15,597,885 (2,932,011) (9,419,548) 130,819,168 (2,932,011) 115,999,428 197,862,146 As at 31 Ashad 2076 As at 31 Ashad 2076 As at 31 Ashad 2076 4.23.4: Movement in the fair value of plan assets 4.23.4: Movement Particulars t or loss in profi 4.23.5: Amount recognised Particulars income in other comprehensive 4.23.6: Amount recognised Fair value of plan assets at Shrawan 1 value of plan assets at Shrawan Fair service costs Current Acturial (gain)/loss Interest on obligation Interest Contributions paid into the plan Total Expected return on plan assets Expected return Benefi ts paid during the year Benefi Total Actuarial (losses) gains Expected return on plan assets Expected return Fair value of plan assets at Ashad end Fair Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

76 www.nmbbanknepal.com - - - - - 4.24 4.25 9.00% 8.00% 16.00% 517,547,945 517,547,945 As at 32 Ashad 2075 As at 32 Ashad 2075 As at 32 Ashad 2075 - - - - - NMB NMB NMB 9.00% 8.00% 16.00% 2,239,236,412 2,239,236,412 As at 31 Ashad 2076 As at 31 Ashad 2076 As at 31 Ashad 2076 ------9.00% 8.00% 16.00% 517,547,945 517,547,945 As at 32 Ashad 2075 As at 32 Ashad 2075 As at 32 Ashad 2075 ------Group Group Group 9.00% 8.00% 16.00% 2,239,236,412 2,239,236,412 As at 31 Ashad 2076 As at 31 Ashad 2076 As at 31 Ashad 2076 Particulars date. liabilities as on reporting any subordinate The bank does not have Particulars 4.23.7: Actuarial assumptions Particulars Debt securities issued Liabilities Subordinated Debt securities issued designated as at fair value through Debt securities issued designated as at fair value through t or loss proﬁ shares Redeemable preference Discount rate Debt securities issued at amortised cost Irredemable cumulative preference shares (liabilities shares preference cumulative Irredemable component) Expected return on plan asset Expected return Total Other Future salary increase Future The Bank had issued non-convertible "7% NMB Debenture 2077" on 6 Falgun 2071 (18 February 2015) amounting to NPR 500 Million. The Debenture, which was fully subscribed, has a 2071 (18 February 2015) amounting to NPR 500 Million. The Debenture, 2077" on 6 Falgun "7% NMB Debenture issued non-convertible The Bank had 10% of rate the at Billion 3 NPR amounting unit per 1,000 NPR. of value face the with 2085 Debenture NMB of units Lacs 30 issued also has bank The months. 6 years 5 of period maturity Private public had subscribed 99,505 units amounting NPR. 9,95,05,000 and 15,85,000 1,58,50,00,000 was through The General for the period of 10 years. at amortized cost has been measured 2075. The debenture nal allotment of NPR. 1,68,45,05,000 to the subscribed unit holders was made on 29 Chaitra Placements. The ﬁ Total Withdrawal rate Withdrawal There is no plan assets for the subsidiaries and the bank deposits the fund at the account maintained at CIT for gratuity payment as per actuary report. at the account maintained CIT for gratuity is no plan assets for the subsidiaries and bank deposits fund There

NMB Annual Report-2018/19 77 - - - 4.26 7,603,290,634 7,603,290,634 As at 32 Ashad 2075 - - - NMB 9,618,162,652 9,618,162,652 As at 31 Ashad 2076 - - - 7,603,290,634 7,603,290,634 7,603,290,634 10,000,000,000 7,603,290,634 7,603,290,634 As at 32 Ashad 2075 As at 32 Ashad 2075 - - - NMB Group 9,618,162,652 9,618,162,652 9,618,162,652 10,000,000,000 9,618,162,652 9,618,162,652 As at 31 Ashad 2076 As at 31 Ashad 2076 Authorized Capital of Rs. 100 each share 100,000,000 Ordinary Particulars Share capital Share shares 4.26.1: Ordinary Particulars Issued capital of Rs. 100 each share 96,181,627 Ordinary Ordinary shares Ordinary Subscribed and paid up capital of Rs. 100 each share 96,181,627 Ordinary Convertible preference shares (equity component only) shares preference Convertible Total Irredemable preference shares (equity component only) shares preference Irredemable Perpetual debt (equity component only) Total Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

78 www.nmbbanknepal.com - - - - 1,690,243,423 4,782,801,746 1,130,245,465 5,913,047,211 7,603,290,634 Amount - - - - 22.23 62.90 14.87 77.77 100.00 As at 32 Ashad 2075 Percent Remarks - - - - NMB 2,138,158,002 6,162,296,550 1,317,708,100 7,480,004,650 9,618,162,652 Amount - - - - 22.23 64.07 13.70 77.77 100.00 Issuance of 30% Bonus Shares Issuance of 1:4 Right Shares and 30% Right Shares Issuance of 10% Bonus Shares of FY 2008-09 and public issue 715,000 shares. right shares Auction of 53,586.5 remaining and auction of unsubscribed right shares. Issuance of 10:21.09 right shares Issuance of 20% Bonus Shares entities of merged issued to shareholders Shares Issuance of 8% Bonus Shares of NPR 943,138,400 additional investment FMO’s Issuance of 19% Bonus Shares Issuance of FPO FY 2074/75 from FY 2073/74 and 10% Bonus Shares from Issuance of 15% Bonus Shares As at 31 Ashad 2076 Percent 199,540,600 1,000,000,000 1,424,641,350 1,651,650,000 2,000,000,000 2,400,000,000 4,154,559,320 4,486,924,066 5,430,062,466 6,461,774,334 7,603,290,634 9,618,162,652 up Capital NPR Cumulative Paid Cumulative Total Foreign ownership Foreign Other Public Other Institutions Other licensed intitutions "A" class licensed institutions Nepal Government Domestic ownership 2006-07(2063-64 BS) The paid up share capital of the Bank has moved over the years as follows: the years over capital of the Bank has moved The paid up share Year Financial ownership share 4.26.2: Ordinary Particulars 2007-08(2064-65 BS) 2008-09(2065-66 BS) 2009-10(2066-67 BS) 2010-11 (2067-68 BS) 2013-14 (2070-71 BS) 2015-16 (2072-73 BS) 2015-16 (2072-73 BS) 2016-17 (2073-74 BS) 2016-17 (2073-74 BS) 2017-18 (2074-75 BS) 2018-19 (2075-76 BS) The 22nd AGM of the bank held on 31 Shrawan 2075 has approved 15% bonus shares (stock dividend) amounting NPR 1,140,493,595 and 23rd AGM held on 26 Poush 2075 has approved AGM held on 26 Poush 2075 has approved (stock dividend) amounting NPR 1,140,493,595 and 23rd 15% bonus shares 2075 has approved The 22nd AGM of the bank held on 31 Shrawan paid up capital of the bank to NPR 9,618,162,652. 10% stock dividend amounting NPR. 874,378,423 .This has raised also. and split of share issue of bonus share usually come from share is 72,855.51 as on Ashad end 2076. Fraction share fractional Total

NMB Annual Report-2018/19 79 6.86 5.23 2.46 2.09 1.90 1.23 1.15 0.99 0.90 0.67 0.66 0.66 0.56 0.56 0.51 0.51 0.50 17.00 % holding 948,647 862,995 639,623 636,211 632,454 541,588 538,740 495,169 494,058 482,357 6,599,040 5,033,290 2,366,426 2,010,983 1,824,299 1,187,616 1,103,054 16,348,288 Share Units Share 1. Nederlandse Financierings-Maatschappij Voor Voor 1. Nederlandse Financierings-Maatschappij N.V. Ontwikkelingslanden Shareholder's Name Shareholder's 2. Employees Provident Fund Provident 2. Employees 3. Yong Lian Realty Sdn Bhd 3. Yong 4. Gayatri Investment And Management P. Ltd. And Management P. 4. Gayatri Investment 5. Nand Kishore Rathi 5. Nand Kishore 6. Dhananjaya Prasad Acharya 6. Dhananjaya Prasad 7. Santosh Rathi 8. Pawan Kumar Golyan 9. Santosh Devi Murarka 10. Purushotam Lal Sanghai 11. Dinbandhu Agrawal 12. Anant Kumar Golyan 13. Balaram Neupane 13. Balaram 14. Narpat Singh Jain 15. Pashupati Murarka 16. Aditya Sanghai 17. Raj Kumar Goyal 18. Ashok Kumar Agrawal Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year The details of shareholders holding shares above 0.5% as of Ashad end 2076 are given below: given 0.5% as of Ashad end 2076 are above holding shares The details of shareholders

80 www.nmbbanknepal.com ------4.27 56,373,878 31,548,400 10,000,000 57,326,449 (7,057,296) 309,547,489 404,406,612 (48,026,502) 1,671,851,454 2,485,970,484 As at 32 Ashad 2075 ------NMB 78,376,972 48,442,603 10,000,000 57,326,449 10,000,000 (5,543,798) 400,000,000 818,733,064 (48,915,471) 2,123,306,659 3,491,726,477 As at 31 Ashad 2076 ------7,057,296 3,169,572 1,828,616 59,774,627 66,869,011 56,373,878 48,026,502 31,946,758 10,000,000 57,326,449 (6,824,546) 222,679,176 309,547,489 404,406,612 (48,835,325) 404,406,612 1,683,991,705 2,502,931,208 As at 32 Ashad 2075 As at 32 Ashad 2075 ------Group 5,543,798 5,997,582 4,526,568 70,040,593 78,376,972 48,915,471 49,146,943 10,000,000 57,326,449 10,000,000 (5,092,298) 591,317,341 102,915,862 400,000,000 818,733,064 (51,397,994) 818,733,064 2,141,571,472 3,519,188,757 As at 31 Ashad 2076 As at 31 Ashad 2076 Particulars Reserves Particulars as Income on Loans and Advances recognized Accrued Interest Provision of Non - Banking Assets (Invesment Property) of Non - Banking Assets (Invesment Provision Statutory general reserve Statutory general Deferred Tax Assets Tax Deferred Exchange equilisation reserve Actuary Losses Corporate social responsibility reserve social responsibility Corporate Fair value adjustment of Equity Shares Fair Capital redemption reserve Capital redemption Total Regulatory reserve Investment adjustment reserve Investment Capital reserve Assets revaluation reserve Assets revaluation Fair value reserve Fair Dividend equalisation reserve Actuarial gain Special reserve Other reserves: - Deferred Tax Reserve Tax - Deferred -Capital Adjustment Fund Staff Fund Skill Development Staff -NMB Staff Relief Fund -NMB Staff Others Total Other Reserves of NMB presented under Statement of change in equity includes debenture/capital redemption reserve, staff skill development fund, capital adjustment fund, corporate fund, capital adjustment corporate skill development staff reserve, redemption under Statement of change in equity includes debenture/capital of NMB presented Other Reserves fund. relief , actuarial gain/losses and staff adjustment reserve fund, investment social responsibility 's own/spouse/ of staff culty of the nature nancial diffi at the time of their acute fi assisst staff nancially to fi with the objective set up Relief Fund amounting NPR. 10,000,000 has been Staff period is NPR. 1 mio. The said reserve calamity. The amount paid during the reporting due to natural critical illness, permanent disability due to illness or destruction of property children 2 Capital. has been included in Tier of NRB for the purpose implementation NFRS and which shall earnings fo the bank as per directive t or retained profi includes the amount that is allocated from Regulatory reserve adjustments as per NFRS: includes the following The amount allocated to this reserve as bonus shares). for distribution of dividend (cash as well as free not be regarded not income are interest a fortnight’s which approximately due as per English Calender to of risk assets portfolio are on majority the interest System, Banking of Core er change Aﬅ end 2076. scal year as of fi realized

NMB Annual Report-2018/19 81 - - - - 4.28 98,274,598 165,645,352 146,099,951 6,653,704,000 6,593,722,925 3,840,304,766 6,284,512,114 44,101,467,843 20,595,601,948 40,389,967,733 23,513,172,255 16,912,142,969 84,803,180,879 40,389,967,733 44,101,467,843 As at 32 Ashad 2075 As at 32 Ashad 2075 As at 32 Ashad 2075 - - - - NMB NMB NMB 65,753,121 99,140,074 175,096,180 8,081,845,898 5,205,236,496 4,350,254,360 44,144,526,363 20,275,562,695 43,884,977,705 20,525,761,911 18,663,727,172 10,827,975,461 88,270,353,369 43,884,977,705 44,144,526,363 As at 31 Ashad 2076 As at 31 Ashad 2076 As at 31 Ashad 2076 - - - - 98,274,598 165,645,352 146,099,951 6,653,704,000 6,593,722,925 3,840,304,766 6,284,512,114 20,595,601,948 44,101,467,843 40,389,967,733 23,513,172,255 16,912,142,969 84,803,180,879 40,389,967,733 44,101,467,843 As at 32 Ashad 2075 As at 32 Ashad 2075 As at 32 Ashad 2075 - - - - Group Group Group 66,303,121 99,140,074 175,096,180 8,081,845,898 5,205,236,496 4,350,254,360 44,144,526,363 20,275,562,695 43,884,977,705 20,525,761,911 18,663,727,172 10,827,975,461 88,270,903,369 43,884,977,705 44,144,526,363 As at 31 Ashad 2076 As at 31 Ashad 2076 As at 31 Ashad 2076 The table below shows the contract or underlying principal amounts of unmatured oﬀ -balance sheet transactions as on reporting date. as on reporting -balance sheet transactions oﬀ or underlying principal amounts of unmatured the contract shows The table below Particulars Contingent liabilities and commitments 4.28.1: Contingent liabilities Particulars and undisbursed facilities 4.28.2: Undrawn Particulars Contingent liabilities Acceptance and documentary credit Undisbursed amount of loans Undrawn and undisbursed facilities Undrawn Bills for collection s limits of overdraﬅ Undrawn Capital commitment Forward exchange contracts Forward cards limits of credit Undrawn Lease Commitment Undrawn limits of letter credit Undrawn Guarantees Litigation Undrawn limits of guarantee Undrawn Underwriting commitment Total Total Other commitments Total Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

82 www.nmbbanknepal.com ------3,662,852 3,662,852 161,982,500 161,982,500 165,645,352 As at 32 Ashad 2075 As at 32 Ashad 2075 ------NMB NMB 6,033,583 6,033,583 59,719,538 59,719,538 65,753,121 As at 31 Ashad 2076 As at 31 Ashad 2076 ------3,662,852 3,662,852 161,982,500 161,982,500 165,645,352 As at 32 Ashad 2075 As at 32 Ashad 2075 ------Group Group 6,583,583 6,583,583 59,719,538 59,719,538 66,303,121 As at 31 Ashad 2076 As at 31 Ashad 2076 4.28.3: Capital commitments nancial statements has not been made in ﬁ authority of the bank but provision by relevant approved Capital expenditure Particulars 4.28.4: Lease commitments Particulars lease commitments Finance the bank is lessee lease, where minimum lease payments under non cancellable operating Future Not later than 1 year Capital commitments in relation to Property and Equipment to Property Capital commitments in relation for and contracted Approved lease commitments Operating minimum lease payments under non cancellable Future the bank is lessee lease, where operating Not later than 1 year but not later than 5 years Later than 1 year Later than 1 year but not later than 5 years Later than 1 year Later than 5 years Approved but not contracted for but not contracted Approved Later than 5 years Sub total Sub total Sub total total Grand Capital commitments in relation to Intangible assets Capital commitments in relation for and contracted Approved Approved but not contracted for but not contracted Approved as per terms of lease contracts. cancellable agreements including that of subsidiaries are The lease agreements Sub total Total

NMB Annual Report-2018/19 83 7,724,850 5,891,178 4,982,475 7,475,620 1,505,630 7,616,269 4,010,125 2,953,526 3,780,670 5,659,272 5,659,272 32,182,889 26,954,038 33,671,385 16,092,992 14,595,261 34,461,482 Amount 134,975,426 175,096,180 Disputed Tax Disputed Tax Status Total Total Total Grand Total Grand Appealed to Supreme Court on 2070.11.15 for which the fi nal decision is pending Court on 2070.11.15 for which the fi Appealed to Supreme nal decision is pending Court on 2071.09.24 for which the fi Appealed to Supreme nal decision is pending on 2075.02.08 for which the fi against the decision of LTO Tribunal Appealed to Revenue nal decision is pending on 2075.02.08 for which the fi against the decision of LTO Tribunal Appealed to Revenue nal decision is pending Review on 2075.04.28 for which the fi Appealed to IRD for Administrative nal decision is pending Review on 2070.06.08 for which the fi Appealed to IRD for Administrative nal decision is pending on 2074.04.16 for which the fi against the decision of LTO Tribunal Appealed to Revenue nal decision is pending Review on 2070.07.29 for which the fi Appealed to IRD for Administrative Appealed to Revenue Tribunal against the decision of LTO on 2074.04.16 for which the fi nal decision is pending on 2074.04.16 for which the fi against the decision of LTO Tribunal Appealed to Revenue nal decision is pending Review on 2074.03.15 for which the fi Appealed to IRD for Administrative nal decision is pending Review on 2075.09.02 for which the fi Appealed to IRD for Administrative nal decision is pending Review on 2071.08.23 for which the fi Appealed to IRD for Administrative nal decision is pending on 2074.04.16 for which the fi against the decision of LTO Tribunal Appealed to Revenue nal decision is pending Review on 2074.04.27 for which the fi Appealed to IRD for Administrative nal decision is pending Review on 2075.06.02 for which the fi Appealed to IRD for Administrative 4.28.5: Litigation a. Contingent of Tax: scal years of various fi Department based on the stage of appeal against amended assessment orders or Inland Revenue Tribunal Court, Revenue led appeals at Supreme The bank has fi below: given ce. The detail of the cases are Offi Taxpayers issued by Large Year Fiscal NMB Bank Limited FY 2063-64 FY 2064-65 FY 2066-67 FY 2067-68 FY 2070-71 Bank Limited Development Erstwhile Clean Energy FY 2065-66 FY 2067-68 Company Limited Erstwhile Prudential Finance FY 2065-66 FY 2068-69 FY 2069-70 FY 2071-72 FY 2066-67 FY 2068-69 FY 2069-70 FY 2070-71 Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year Since decisions for these cases are pending, disputed tax amount of NPR 175,096,180 mentioned above has been disclosed as contingent liability on Income Tax and no provision for addi- and no provision Income Tax has been disclosed as contingent liability on tax amount of NPR 175,096,180 mentioned above pending, disputed cases are Since decisions for these tional liability has been made. Bank Ltd. for FY 2071/72 to Development led by NMB Bank Ltd. for FY 2072/73 to 2074/75 and erstwhile Clean Energy end 2075/76, self-Assessment Returns fi scal year As of the fi ce. Offi Payers Tax by Large to be reassessed Bank Ltd. for FY 2072/73 is yet 2072/73 and by erstwhile Bhrikuti Development of 80 Annas (2,543 sq meter) for NPR 590 Million in Kamaladi, Kathmandu. The land was bought through land with an area b. In the second quarter of FY 2015/16, Bank had purchased of auction process. led case in Kathmandu District Court for repeal has fi of property owner nancial institutions. The previous involving four fi auction process

84 www.nmbbanknepal.com - - - 4.29 4.30 2,400,853 9,590,254 24,901,182 36,395,287 35,095,890 42,538,692 32,550,947 38,307,122 407,924,702 129,463,374 8,077,886,340 5,716,330,942 8,728,699,831 5,824,685,753 Year ended 32 Ashad 2075 Year Year ended 32 Ashad 2075 Year - - - NMB NMB 26,149,802 90,208,322 82,909,684 17,217,476 13,780,049 69,566,217 494,048,717 145,439,154 135,757,511 140,169,449 6,532,587,197 10,172,263,538 6,838,038,085 11,082,059,031 Year ended 31 Ashad 2076 Year Year ended 31 Ashad 2076 Year - - - 16,652,026 36,395,287 35,095,890 42,538,692 32,550,947 52,770,428 38,307,122 454,384,404 129,463,374 169,373,719 8,436,853,243 5,760,802,430 9,169,057,454 6,036,130,108 Year ended 32 Ashad 2075 Year Year ended 32 Ashad 2075 Year - - - Group Group 29,627,873 90,208,322 82,909,684 17,217,476 62,214,239 69,566,217 514,448,520 145,439,154 323,435,591 140,169,449 6,599,609,495 10,625,666,262 7,092,738,463 11,607,773,819 Year ended 31 Ashad 2076 Year Year ended 31 Ashad 2076 Year As per NRB Interest Income Recognition Guideline, the interest amount of NPR. 32,210,184.75 has been reversed and credited to Interest Suspense during the reporting period. Suspense during the reporting to Interest and credited amount of NPR. 32,210,184.75 has been reversed Income Recognition Guideline, the interest As per NRB Interest Total interest income interest Total Other Total interest expense interest Total Loan and advances to staff Loan and advances to staff Other Investment securities Investment Subordinated liabilities Subordinated Loans and advances to customers Debt securities issued Loan and advances to bank and fi nancial institutions Loan and advances to bank fi Borrowing Placement with bank and fi nancial institutions Placement with bank and fi Deposits from customers Deposits from Due from Nepal Rastra Bank Nepal Rastra Due from Due to Nepal Rastra Bank Due to Nepal Rastra Cash and cash equivalent Due to bank and fi nancial institutions Due to bank and fi Interest income include interest income on loan and advance, investment securities except on those investment securities measure at fair value through profi t or loss, cash and profi at fair value through securities measure securities except on those investment income on loan and advance, investment income include interest Interest as follows: , etc. Details presented BFIs, loan and advances to staff equivalent, due from Particulars Interest expenses include interest accrued on deposits collected and debt securities issued. Details presented as follows: accrued on deposits collected and debt securities issued. Details presented expenses include interest Interest Particulars Interest income Interest expense Interest Since decisions for these cases are pending, disputed tax amount of NPR 175,096,180 mentioned above has been disclosed as contingent liability on Income Tax and no provision for addi- and no provision Income Tax has been disclosed as contingent liability on tax amount of NPR 175,096,180 mentioned above pending, disputed cases are Since decisions for these tional liability has been made. Bank Ltd. for FY 2071/72 to Development led by NMB Bank Ltd. for FY 2072/73 to 2074/75 and erstwhile Clean Energy end 2075/76, self-Assessment Returns fi scal year As of the fi ce. Offi Payers Tax by Large to be reassessed Bank Ltd. for FY 2072/73 is yet 2072/73 and by erstwhile Bhrikuti Development of 80 Annas (2,543 sq meter) for NPR 590 Million in Kamaladi, Kathmandu. The land was bought through land with an area b. In the second quarter of FY 2015/16, Bank had purchased of auction process. led case in Kathmandu District Court for repeal has fi of property owner nancial institutions. The previous involving four fi auction process

NMB Annual Report-2018/19 85 ------4.31 2,582,665 11,623,876 14,568,251 70,937,543 24,982,254 23,986,846 34,877,234 13,239,368 25,586,494 141,505,074 180,943,955 249,416,509 794,250,068 Year ended 32 Ashad 2075 Year ------NMB 9,408,164 2,705,220 2,882,016 13,385,760 75,591,404 20,917,818 25,663,923 39,088,343 19,347,569 29,596,921 172,428,803 250,984,009 341,530,916 1,003,530,866 Year ended 31 Ashad 2076 Year ------2,582,665 6,579,223 11,623,876 14,568,251 70,937,543 24,982,254 23,986,846 34,877,234 13,239,368 25,586,494 145,983,371 180,943,955 383,727,229 939,618,308 Year ended 32 Ashad 2075 Year ------Group 9,408,164 2,705,220 3,087,144 2,882,016 13,385,760 75,591,404 20,917,818 25,663,923 39,088,343 19,347,569 29,596,921 177,472,314 250,984,009 489,096,397 1,159,227,002 Year ended 31 Ashad 2076 Year Total fees and Commission Income Total Others Agency Commission Collection Fee Other fees and commission income: and Discount Bills Purchase Locker rental Locker Commission on share underwriting/issue Commission on share Commission on guarantee contracts issued contracts Commission on guarantee Commission on letter of credit Remittance fees Brokerage fees Brokerage Asset management fees Investment banking fees Investment Prepayment and swap fees Prepayment Credit card/ATM issuance and renewal fees issuance and renewal card/ATM Credit DD/TT/Swiﬅ fees DD/TT/Swiﬅ Commitment fees Consortium fees Service fees Loan administration fees Loan administration Particulars Fees and Commission Income Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

86 www.nmbbanknepal.com ------4.32 4.33 5,159,536 7,782,037 13,962,705 35,803,750 62,708,027 299,605,983 299,605,983 Year ended 32 Ashad 2075 Year ended 32 Ashad 2075 Year ------NMB NMB 8,585,284 23,158,077 22,801,865 39,410,044 93,955,270 352,049,490 352,049,490 Year ended 31 Ashad 2076 Year ended 31 Ashad 2076 Year ------7,782,037 26,341,052 35,803,750 69,926,838 299,605,983 299,605,983 Year ended 32 Ashad 2075 Year ended 32 Ashad 2075 Year ------Group Group 8,585,284 30,621,497 22,801,865 39,410,044 352,049,490 101,418,691 352,049,490 Year ended 31 Ashad 2076 Year ended 31 Ashad 2076 Year Total fees and Commission Expense Total Net trading income Net trading Other fees and commission expense Other Remittance fees and commission Gain/loss foreign exchange transation Gain/loss foreign DD/TT/Swiﬅ fees DD/TT/Swiﬅ Dividend income on trading assets Dividend income on trading Brokerage Interest income on trading assets income on trading Interest Guarantee commission Guarantee VISA/Master card fees VISA/Master card assets Gain/loss on disposal of trading ATM management fees ATM assets Changes in fair value of trading Particulars Particulars Fees and commission expense income Net trading

NMB Annual Report-2018/19 87 ------4.34 4.35 920,805 (207,026) 2,137,344 3,155,000 6,599,656 6,926,498 6,346,579 12,464,871 132,758,055 164,962,228 (225,790,343) (219,650,789) Year ended 32 Ashad 2075 Year ended 32 Ashad 2075 Year ------NMB NMB 504,476 2,172,966 8,950,143 13,462,733 35,200,614 71,020,758 88,012,372 157,322,491 210,373,919 166,272,634 Year ended 31 Ashad 2076 Year ended 31 Ashad 2076 Year ------491,765 (207,026) 3,155,000 6,594,315 3,237,886 6,926,498 6,346,579 12,464,871 134,100,160 166,970,494 (198,186,901) (192,047,347) Year ended 32 Ashad 2075 Year ended 32 Ashad 2075 Year ------Group Group 504,476 2,870,741 8,950,143 13,462,733 35,200,614 72,599,705 88,012,372 167,104,939 212,650,641 176,055,082 Year ended 31 Ashad 2076 Year ended 31 Ashad 2076 Year Total Other Gain/loss on sale of gold and silver Operating lease income Operating Total Gain/loss on sale of investment property Gain/loss on sale of investment Impairment charge/(reversal) on investment properties on investment Impairment charge/(reversal) Gain/loss on sale of property and equipment Gain/loss on sale of property Impairment charge/(reversal) on goodwill and intangible Impairment charge/(reversal) assets Dividend on equity instruments Impairment charge/(reversal) on property and equipment on property Impairment charge/(reversal) Fair value gain/loss on investment properties value gain/loss on investment Fair Impairment charge/(reversal) on placement with banks and Impairment charge/(reversal) nancial institutions fi Gain/loss on sale of investment securities Gain/loss on sale of investment Impairment charge/(reversal) on fi nancial Investment on fi Impairment charge/(reversal) Foreign exchange revauation gain exchange revauation Foreign Impairment charge/(reversal) on loan and advances to Impairment charge/(reversal) customer Particulars Particulars Other operating income Other operating for loan and other losses Impairment charge/(reversal) on loan and advances to B/FIs Impairment charge/(reversal) Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

88 www.nmbbanknepal.com - - - - - 4.36 40,000 12,323 157,937 30,566,327 25,393,888 28,134,664 22,604,303 29,935,358 35,893,037 285,146,674 30,724,264 53,528,551 283,280,022 332,360,603 (51,954,699) 736,423,762 1,021,570,435 Year ended 32 Ashad 2075 Year ------NMB 36,021,261 21,878,721 22,743,028 50,119,157 32,603,472 28,304,668 35,951,632 58,175,295 360,889,315 36,021,261 335,490,961 433,615,983 105,465,657 1,415,793,493 1,054,904,178 Year ended 31 Ashad 2076 Year - - - - 12,323 201,837 4,932,000 1,125,280 30,947,980 25,766,104 28,224,874 25,090,618 33,725,711 39,578,609 299,140,340 31,149,817 53,990,977 340,047,178 381,101,707 (51,954,699) 858,799,520 1,157,939,860 Year ended 32 Ashad 2075 Year - - - - Group 205,178 1,300,096 1,137,739 36,318,500 21,878,721 22,931,960 50,599,234 40,593,618 32,912,733 41,150,814 57,559,486 378,471,332 36,523,678 404,821,146 497,302,046 114,124,812 1,587,182,602 1,208,711,270 Year ended 31 Ashad 2076 Year Grand total Grand Employees bonus Employees Subtotal - Staff Welfare Expenses Welfare - Staff - Recruitment and Selection Expenses Other expenses related to staff to staff Other expenses related Finance expense under NFRS Finance Pension expense Cash-settled share-based payments Cash-settled share-based Employees incentive Employees Insurance Medical -Home Leave Expenses -Home Leave -Leave Fare Expenses Fare -Leave - Sick Leave Expenses - Sick Leave Leave encashment Leave Training & development expense & development Training Uniform Provident fund Provident Gratuity expense Gratuity Allowances Salary Particulars Personnel Expense

NMB Annual Report-2018/19 89 ------4.37 45,000 113,000 530,800 575,569 343,969 7,024,459 6,384,050 1,663,002 9,566,608 3,976,433 5,486,234 1,118,700 1,160,742 2,250,000 21,024,048 10,776,212 20,344,993 84,901,483 22,294,793 72,252,107 16,244,341 21,646,349 31,440,073 27,328,599 18,931,292 46,448,634 14,303,564 28,122,434 113,096,710 589,394,199 173,438,838 290,836,003 Year ended 32 Ashad 2075 Year - - - - NMB 15,000 433,862 306,020 524,039 300,182 5,765,104 1,191,458 6,884,216 3,055,969 5,678,558 2,774,538 3,344,731 1,118,700 2,082,488 3,207,000 14,978,672 23,573,388 10,424,244 73,269,284 22,452,358 14,556,471 27,768,631 26,733,578 48,606,865 40,910,154 21,905,537 56,205,013 17,578,042 31,420,687 134,965,710 106,630,907 708,661,406 162,349,575 395,614,463 Year ended 31 Ashad 2076 Year - - - - - 85,670 113,000 530,800 336,775 695,894 537,811 7,296,717 7,109,050 1,767,532 4,764,485 5,486,234 1,431,710 1,776,781 3,464,850 33,384,937 14,878,057 20,344,993 85,590,263 22,294,793 10,475,628 72,666,519 17,824,378 21,777,922 32,093,240 30,731,834 27,872,469 49,498,136 14,535,454 29,601,084 123,756,305 642,723,322 191,965,055 312,537,044 Year ended 32 Ashad 2075 Year - - - - Group 43,445 433,862 306,020 637,480 5,765,104 1,191,458 7,915,301 3,428,634 5,679,038 3,724,531 3,505,675 1,101,864 1,539,393 2,099,053 4,360,655 19,095,171 23,573,388 11,474,244 73,970,329 22,889,213 15,643,520 34,877,547 27,438,318 49,315,657 45,633,378 32,427,002 59,387,524 17,854,902 32,627,629 149,178,241 107,035,922 764,153,498 170,086,169 426,603,409 Year ended 31 Ashad 2076 Year Total Others Merger Expenses Merger Issue And Surveillance Expenses Issue And Surveillance Dematerialization Expenses IS Audit-Compliance Expenses Deposit Guarantee Expenses Deposit Guarantee Rates and Taxes Bank Charges and Commission Bank Charges Card Transaction Charges Transaction Card Membership Fee Donations Advertisements Entertainment/Business Promotion Annual General Meeting Expenses Annual General Others Onerous lease provisions Onerous Corporate social responsibility expense social responsibility Corporate Operating expense of investment properties expense of investment Operating Operating lease expense Operating m. Repair and Maintenance l. Security Expenses k. Outsource Staff Expenses Staff k. Outsource j. Vehicle fuel j. Vehicle i. Offi ce Expenses i. Offi h. Periodicals and Books g. Stationery and Printing f. Travelling Allowances and Expenses Allowances f. Travelling e. Offi ce Equipment, Furniture and Repair ce Equipment, Furniture e. Offi c. Postage, Telex, Telephone, Fax Telephone, c. Postage, Telex, b. Insurance a. Electricity and Water Offi expense ce administration Offi Professional and legal expense Professional Other audit related expense Other audit related Auditors' remuneration Directors' expense Directors' Directors' fee Directors' Particulars Other operating expense Other operating Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

90 www.nmbbanknepal.com - - - - - 4.38 4.39 4.40 5,853,735 43,140,193 37,935,379 37,935,379 43,140,193 141,841,503 147,695,238 Year ended 32 Ashad 2075 Year ended 32 Ashad 2075 Year ended 32 Ashad 2075 Year - - - - - NMB NMB NMB 13,100,691 17,090,672 17,585,901 17,585,901 17,090,672 163,692,664 176,793,355 Year ended 31 Ashad 2076 Year ended 31 Ashad 2076 Year ended 31 Ashad 2076 Year - - - - - 6,194,294 43,140,193 37,935,379 37,935,379 43,140,193 149,793,266 155,987,560 Year ended 32 Ashad 2075 Year ended 32 Ashad 2075 Year ended 32 Ashad 2075 Year - - - - Group Group Group 23,248 13,587,223 17,090,672 17,585,901 17,609,148 17,090,672 174,082,276 187,669,499 Year ended 31 Ashad 2076 Year ended 31 Ashad 2076 Year ended 31 Ashad 2076 Year Total Other expense Total Expense of restructuring Amortisation of intangible assets Other income Redundancy provision Depreciation on investment property on investment Depreciation Depreciation on property and equipment on property Depreciation of loan written oﬀ Recovery Loan written oﬀ Total Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life while amortization is the systematic allocation of the depreciable amount of an intangi- its useful life while amortization is the systematic allocation of depreciable amount of an asset over is the systematic allocation of depreciable Depreciation on plant and equipment amortization of intangible assets. and amortization include depreciation its useful life. Depreciation ble asset over Particulars as under. presented are of transactions with the operation relationship no direct The incomes that have Particulars as under. presented are of transactions with the operation relationship The expense that has no direct Particulars Depreciation and Amortisation Depreciation income Non operating expense Non operating

NMB Annual Report-2018/19 91 - - 4.41 32.12% 3,389,813 5,318,122 33,195,838 227,935,630 246,603,042 824,302,920 842,221,159 712,320,180 824,302,920 231,325,443 829,621,042 (117,093,734) 2,566,320,061 (117,093,734) Year ended 32 Ashad 2075 Year ended 32 Ashad 2075 Year - - NMB NMB 30.56% 3,389,813 1,638,529 14,674,649 (3,439,237) 225,315,620 261,507,446 992,528,515 974,401,150 (3,439,237) 990,727,807 992,528,515 228,705,433 994,167,044 3,248,003,834 Year ended 31 Ashad 2076 Year ended 31 Ashad 2076 Year - - 31.85% 3,389,813 5,318,122 33,195,838 228,129,273 246,603,042 860,473,515 878,585,397 749,419,541 860,473,515 231,519,086 865,791,637 (116,372,096) 2,701,608,171 (116,372,096) Year ended 32 Ashad 2075 Year ended 32 Ashad 2075 Year - - Group Group 30.57% 3,053,084 1,638,529 14,674,649 (7,988,980) 228,049,023 265,093,198 (7,988,980) 231,102,107 1,041,813,251 1,022,496,809 3,408,322,698 1,035,462,800 1,041,813,251 1,043,451,780 Year ended 31 Ashad 2076 Year ended 31 Ashad 2076 Year Eff tax rate ective Eff Total income tax expense Total Total income tax expense Total Recognition of previously unrecognised tax losses unrecognised Recognition of previously losses forward ect of carried eff Less: Tax Less: Tax eff ect of expenses allowed/Income that are not that are ect of expenses allowed/Income eff Less: Tax for tax purpose allowed Changes in tax rate Add/less: Tax eff ect on other items eff Add/less: Tax Origination and reversal of temporary diff erences diff of temporary Origination and reversal Deferred tax expense Deferred ect on exempt income eff Less: Tax Adjustments for prior years not deductible for tax ect of expenses that are eff Add: Tax purpose Current year Current of 30 %/25% amount at tax rate Tax Current tax expense Current tax t before Profi Income tax expense is higher in tax rate ective 2075 due to which eff year suspense for the previous Act, 2058. The bank has also paid income tax on interest as per Income Tax The bank has calculated Income Tax year. comparision to current Particulars t 4.41.1: Reconciliation of tax expense and accounting profi Particulars Notes to Consolidated Financial Statements Notes to Consolidated Financial ended 31 Ashad 2076 For the year

92 www.nmbbanknepal.com ------(7,057,296) (1,731,624) (48,026,502) (59,774,627) (66,869,011) (90,999,503) (18,537,928) 967,358,536 (222,679,176) (370,758,551) (Amount in NPR) (404,406,612) 1,371,765,147 1,853,792,753 As at 32 Ashad 2075 ------(888,969) 1,513,498 (3,171,582) (43,141,235) (22,003,093) (90,452,511) (22,572,760) (368,638,165) (451,455,205) (414,326,452) 1,670,792,457 1,256,466,005 2,257,276,027 As at 31 Ashad 2076 Regulatory adjustment : (+) received accrued interest (-)/previous receivable a. Interest b. Short loan loss provision in accounts (-)/reversal (+) in accounts (-)/reversal b. Short loan loss provision (+) (-)/reversal for possible losses on investment c. Short provision (+) on Non Banking Assets (-)/resersal d. Short loan loss provision Distributable profi t or (loss) Distributable profi Total Adjustments Total f. Goodwill recognised (-)/ impairment of Goodwill (+) f. Goodwill recognised (+) (-)/resersal gain recognised purchase g. Bargain (+) (-)/reversal h. Acturial loss recognised i. Other (+/-) securities value of investment - Fair Particulars adjustment or (loss) befor regulatory Profit (+) (-)/ reversal tax assets recognised e. Deferred Net profi t or (loss) as per statement of profi t or loss t or (loss) as per statement of profi Net profi Appropriations: reserve a. General b. Foreign exchange fl uctuation fund exchange fl b. Foreign reserve c. Capital redemption fund social responsibility d. Corporate fund training e. Employees' Adjustment Reserve f. Investment Statement of distributable profi t or loss Statement of distributable profi ended 31 Ashad, 2076 (16 July 2019 ) For the year (As per NRB Regulation)

NMB Annual Report-2018/19 93 Unaudited Financial Results (Quarterly) Fourth Quarter ended of Fiscal Year 2018-19 (FY 2075/2076)

Rs. in '000'

Condensed Consolidated Statement of Financial Position Immediate Previous Year This Quarter Ending Ending(Audited) Assets Cash and cash equivalent 8,095,758 5,180,404 Due from Nepal Rastra Bank 10,818,537 7,260,195 Placement with Bank and Financial Institutions 2,177,098 276,407 Derivative ﬁ nancial instruments 8,595,482 7,506,751 Other trading assets 340,390 321,720 Loan and advances to B/FIs 3,317,962 2,497,568 Loans and advances to customers 88,488,182 72,711,772 Investment securities 10,316,351 9,448,447 Current tax assets - - Investment in susidiaries 248,552 248,552 Investment in associates - - Investment property 102,916 59,775 Property and equipment 1,577,899 1,559,570 Goodwill and Intangible assets 115,409 22,054 Deferred tax assets 66,869 66,869 Other assets 1,206,735 4,458,384 Total Assets 135,468,139 111,618,467 Liabilities Due to Bank and Financial Instituions 624,365 1,036,269 Due to Nepal Rastra Bank 3,203,523 660,072 Derivative ﬁ nancial instruments 8,458,374 7,477,484 Deposits from customers 97,892,302 83,970,867 Borrowing 3,468,060 - Current Tax Liabilities 9,599 60,418 Provisions 9,078 - Deferred tax liabilities - - Other liabilities 2,107,809 1,406,000 Debt securities issued 2,239,236 517,548 Subordinated Liabilities - - Total liabilities 118,012,348 95,128,658 Equity Share capital 9,618,163 7,603,291 Share premium 2,512,799 4,061,367 Retained earnings 1,792,975 2,339,182 Reserves 3,531,856 2,485,970 Total equity attributable to equity holders 17,455,791 16,489,809 Non-controlling interest - - Total equity 17,455,791 16,489,809 Total liabilities and equity 135,468,139 111,618,467

94 www.nmbbanknepal.com Unaudited Financial Results (Quarterly) Fourth Quarter ended of Fiscal Year 2018-19 (FY 2075/2076)

Rs. in '000'

Up to Corrosponding Condensed Consolidated Statement of Profi t or Loss Up to this Quarter Previous Year Quarter (Audited) Interest income 11,104,234 8,728,700 Interest expense 6,838,038 5,824,686 Net interest income 4,266,196 2,904,014 Fees and Commission Income 1,003,531 794,250 Fees and commission expense 93,955 62,708 Net fee and commission income 909,576 731,542 Net interest, fee and commission income 5,175,771 3,635,556 Net trading income 352,049 299,606 Other operating income 210,374 164,962 Total operating income 5,738,195 4,100,124 Impairment charge/(reversal) for loans and other losses 163,122 (219,651) Net operating income 5,575,073 4,319,775 Operating expense Personnel expenses 1,419,153 1,021,570 Other operating expenses 700,390 589,394 Depreciation & Amortisation 176,793 147,695 Operating Profi t 3,278,736 2,561,115 Non operating income 17,091 43,140 Non operating expense 17,586 37,935 Profi t before income tax 3,278,241 2,566,320 Income tax expense Current Tax 968,188 829,621 Deferred Tax expense/(Income) - (117,094) Profi t for the period 2,310,053 1,853,793

Condensed Consolidated Statement of Comprehensive Income Proﬁ t/Loss for the period 2,310,053 1,853,793 Other Comprehensive lncome 625 (44,269) Total Comprehensive lncome 2,310,678 1,809,524

Statement showing Net Profi t a er Regulatory Adjustments: Net Profi t for the period ended 31 Asadh 2076 2,310,053 Profi t required to be appropriated to statutory reserve (591,896) Profi t required to be transfer to Regulatory Reserve (443,365) Net Profi t for the period ended 31 Ashad 2076 available for distribution 1,274,793

NMB Annual Report-2018/19 95 Unaudited Financial Results (Quarterly) Fourth Quarter ended of Fiscal Year 2018-19 (FY 2075/2076)

Up to Corrosponding Ratios Upto This Quarter (YTD) Previous Year Quarter

Capital fund to RWA 15.32% 15.75% Non performing loan (NPL) to toal loan 0.82% 0.88% Total loan loss provision to Total NPL 184.52% 184.17% Cost of Funds (YTD) 7.26% 7.46% CCD Ratio 76.88% 77.72% Base Rate 9.86% 10.70% Average Interest Spread (Calculated as per NRB Directives)- 4.26% 4.14% Last Month of Quarter Additional Informations: Average Yield (YTD Average) 10.80% 10.91% Return on Equity (Annualized) 13.61% 13.54% Return on Assets (Annualized) 1.86% 1.80% PE Ratio (Annualized) 15.86 16.38 Net-Worth per share (NPR) 181.49 216.88 Assets per share (NPR) 1,418.41 1,478.19 Liquidity Ratio (NLA) 28.28% 23.64%

96 www.nmbbanknepal.com Rs. in '000' Reasons for Variance Due to re-classifi cation from Placement with BFI's cation from Due to re-classifi Due to adjustment of receivable of Int. Subsidy from NRB and placements of Int. Subsidy from Due to adjustment of receivable Due to re-classifi cation to Cash and Equivalent placements Due to re-classifi Due to change in impairment Due to adjustment of deferred tax Due to adjustment of deferred Due to adjustment in sundry creditor and net off provisons and net off Due to adjustment in sundry creditor Due to change in tax liabilities and net off with current tax assets with current Due to change in tax liabilities and net off Due to net off with other assets Due to net off Due to adjustment of Interest Suspense as per NRB Guidelines and staf bonus Due to adjustment of Interest Due to change in profi t Due to change in profi t Due to change in profi ------0% 0% 0% 0% 5% 0% 2% 0% 0% 0% 0% 0% -1% -1% 271% -100% In % (Rounded off ) (Rounded off ------Variance 597 3,172 2,270 2,270 10,644 25,979 38,146 (4,131) (3,150) (4,861) (9,078) 55,047 (12,648) (40,129) (52,777) (52,777) In amount ------70,041 35,579 340,390 248,552 102,916 115,409 624,365 8,096,355 2,172,967 8,595,482 3,317,962 1,577,899 1,201,874 3,203,523 8,458,374 3,468,060 2,145,956 2,239,236 9,618,163 2,512,799 1,780,327 3,491,726 As per Audited 10,829,182 88,485,031 10,316,351 97,892,302 17,403,014 Financial Financial Statement 17,403,014 135,470,410 118,067,395 135,470,410 ------9,599 9,078 66,869 340,390 248,552 102,916 115,409 624,365 8,095,758 2,177,098 8,595,482 3,317,962 1,577,899 1,206,735 3,203,523 8,458,374 3,468,060 2,107,809 2,239,236 9,618,163 2,512,799 1,792,975 3,531,856 As per 10,818,537 88,488,182 10,316,351 97,892,302 17,455,791 Financial Financial unaudited Statement 17,455,791 118,012,348 135,468,139 135,468,139 Statement of Financial Position Statement of Financial Assets Cash and cash equivalent Due from Nepal Rastra Bank Nepal Rastra Due from Placement with Bank and Financial Institutions Placement with Bank and Financial Derivative fi nancial instruments fi Derivative assets Other trading Loan and advances to B/FIs Loans and advances to customers Investment securities Investment tax assets Current in susidiaries Investment in associates Investment property Investment and equipment Property Goodwill and Intangible assets tax assets Deferred Other assets Total Assets Total Liabilities Instituions Due to Bank and Financial Bank Due to Nepal Rastra nancial instruments fi Derivative customers Deposits from Borrowing Liabilities Tax Current Provisions Deferred tax liabilities Deferred Other liabilities Debt securities issued Liabilities Subordinated Total liabilities Total Equity Share capital Share Share premium Share Retained earnings Reserves equity attributable to holders Total Non-controlling interest Non-controlling Total equity Total liabilities and equity Total Comparison Unaudited and Audited Financial Statements as of FY 2018-2019 (FY 2075/76) Comparison Unaudited and Audited Financial

NMB Annual Report-2018/19 97 Rs. in '000 Reasons for Variance Due to booking of Interest Income Subsidy and reversal of Interest Suspense as per of Interest Income Subsidy and reversal Due to booking of Interest NRB guidelines Due to change in Interest Income Due to change in Interest Due to addition of impairment Due to change in Staff Bonus Due to change in Staff of lease expense as per NAS 17. Due to recognition t and Income Tax. Due to change in Profi Due to booking of deferred tax Due to booking of deferred Due to change in profi t Due to change in profi t and subsequent approprations Due to change in profi ------0% 2% 0% 1% 3% 0% 0% 0% -2% -3% -1% -1% -1% -2% -2% -1% 100% In % (Rounded off ) (Rounded off ------Variance 3,150 8,271 25,979 34,451 (3,360) (3,439) (22,175) (52,777) (22,175) (22,175) (22,175) (25,325) (30,237) (30,237) (52,777) (52,777) (18,327) In amount - 625 93,955 17,091 17,586 (3,439) 352,049 210,374 166,273 708,661 176,793 994,167 909,576 6,838,038 1,003,531 1,415,793 2,257,276 As per Audited 4,244,021 5,153,597 5,716,020 5,549,747 3,248,499 3,248,004 2,257,276 2,257,901 1,256,466 11,082,059 Financial Financial (1,000,810) Statement - - 625 93,955 17,091 17,586 352,049 210,374 163,122 700,390 176,793 968,188 909,576 6,838,038 1,003,531 1,419,153 2,310,053 As per 4,266,196 5,175,771 5,738,195 5,575,073 3,278,736 3,278,241 2,310,053 2,310,678 1,274,793 11,104,234 Financial Financial (1,035,261) unaudited Statement Particulars Interest income Interest Interest expense Interest Net interest income Net interest Fees and Commission Income Fees and commission expense Net fee and commission income Net interest, fee and commission income Net interest, Net trading income Net trading Other operating income Other operating income operating Total Impairment charge/(reversal) for loans and other losses Impairment charge/(reversal) Net operating income Net operating Operating expense Operating Personnel expenses Other operating expenses Other operating & Amortisation Depreciation t Profi Operating income Non operating Income tax expense Tax Current expense/(Income) Tax Deferred Non operating expense Non operating income tax t before Profi Profi t for the period Profi Income Other Comprehensive Total Comprehensive Income Comprehensive Total t Distributable Profi t or loss t/(loss) as per profi Net profi Add/Less: Regulatory adjustments as per NRB Directive adjustments er regulatory t/(loss) a Profi Comparison Unaudited and Audited Financial Statements as of FY 2018-2019 (FY 2075/76) Comparison Unaudited and Audited Financial

98 www.nmbbanknepal.com Signiﬁ cant Accounting Policies to Consolidated Financial Statements

Financial Year 17 July 2018 to 16 July 2019 (1 Shrawan 2075 to 31 Ashad 2076)

1. General Information

1.1 Reporting Entity: NMB Bank Limited (hereinaﬅ er referred to as “the Bank”) is a limited liability company domiciled in Nepal. The registered oﬃ ce of the Bank is G.P.O. Box 11543, Babar Mahal, Kathmandu, Nepal. The Bank has a primary listing in the Nepal Stock Exchange Limited, the only Stock Exchange in Nepal.

The Bank carries out commercial banking activities in Nepal licensed under the Bank and Financial Institutions Act, 2006 as Class A ﬁ nancial institution in May 2008 and has been operating in the Nepalese Financial market for over twenty four years.

1.2 Subsidiary:

a. NMB Capital Ltd. (NMBCL) is a 100% subsidiary company of the Bank and was incorporated on September 17, 2010 as a public limited company as per the Companies Act 2063. It is into Merchant and investment banking licensed by Securities Board of Nepal under the Securities Businessperson (Merchant Banker) Regulations, 2008.

b. NMB Microfi nance Bittiya Sanstha Ltd. (NMBMF) is incorporated as a public limited company under Companies Act, 2063 and licensed by Nepal Rastra Bank as “D” Class fi nancial institution having Nation Wide working area to operate its microfi nance program under Bank and Financial Institution Act 2006. As at the Balance Sheet date, the bank holds 51% controlling interest in the NMBMF.

The ﬁ nancial year of both of the subsidiaries is same as that of the Bank ending on July 16, 2019

1.3 “The Group” represents The Bank and the subsidiaries.

1.4 Approval of Financial Statements:

The consolidated ﬁ nancial statements of the group for the year ended 16 July 2019 have been authorized by the Board of Directors in accordance with its resolution dated 10 November 2019 and the Board of Directors have recommended for its approval by the forthcoming Annual General Meeting

NMB Annual Report-2018/19 99 2. Summary ovf Signiﬁ cant Accounting Policies

The principal accounting policies applied in the preparation of the ﬁ nancial statements of the Bank are set out below. Unless otherwise stated, these policies have been consistently applied to all the years presented herein.

2.1 Basis of preparation

The Consolidated Financial Statements have been prepared in accordance with the Nepal Financial Reporting Standard (NFRS) issued by the Nepal Accounting Standards Board (NASB) except otherwise stated, comply with the requirements of Companies Act 2063 and and also provide appropriate disclosures required under regulations of the Securities Exchange Board of Nepal (SEBON). The ﬁ nancial statements have been prepared in accordance with the accrual basis.

The cash fl ow statement has been prepared using the direct method whereby operating profi t is adjusted for eff ects of non-cash transactions such as depreciation and loan losses. The cash fl ows are classifi ed by operating, investing and fi nancing activities.

The Group has opted for some certain carve outs which are brieﬂ y described in Notes to Accounts. As a consequence of carve out adjustments, net proﬁ t would have been impacted.

In preparing the Consolidated Financial Statement, the ﬁ nancial statements of the Bank and the Subsidiary are combined line by line by adding together Assets, Liabilities, Equity, Income and Expenses. The consolidated ﬁ nancial statements have been prepared in accordance with Nepal Financial Reporting Standards 10 “Consolidated Financial Statements”.

Para 8 of NFRS 10 outlines three conditions to be fulﬁ lled in order to establish control:

(a) Power over the investee; (b) Exposure, or rights, to variable returns from its involvement with the investee; and (c) The ability to use its power over the investee to aﬀ ect the amount of the investor’s returns

Non-Controlling Interest (NCI) refers to ownership of a company, which does not give the shareholder the control of the company.

2.2 Going Concern

The Board of Directors have made an assessment of Bank’s ability to continue as a going concern and are satisﬁ ed that it has the resources to continue in business for the foreseeable future. Furthermore, the board is not aware of any material uncertainties that may cast signiﬁ cant doubt upon Bank’s ability to continue as a going concern and they do not intend either to liquidate or to cease operations of it. Hence, the Financial Statements are continued to be prepared on the going concern basis.

2.3 Responsibility for Financial Statements

As stated in paragraph 6 of NAS 01 “Presentation of Financial Statements” read along with Section 108(2) of the Company Act, 2006 the Board of Directors is responsible for the preparation of ﬁ nancial statements of the Bank. The Board of Directors acknowledges this responsibility. The Financial statements include the following components:

100 www.nmbbanknepal.com (a) Consolidated Statement of Financial Position(SOFP) stating the ﬁ nancial position of the Bank and the Group as at the end of reporting period;

(b) Consolidated Statement of Proﬁ t and Loss (SOPL) and Consolidated Statement of Other Comprehensive Income (SOCI) stating the ﬁ nancial performance of the Bank and the Group for the reported period ended.

(c) Consolidated Statement of Cash Flow Statement (SOCF) stating the ability of Bank and the Group to generate Cash and Cash Equivalent.

(d) Consolidated Statement of Changes in Equity (SOCE) stating all the changes in Equity of the Bank and the Group during the reporting period.

(e) Notes to the Consolidated Financial Statements comprising summary of Principal Accounting Policies and explanatory notes that are of signiﬁ cant importance to the users of Financial Statements.

2.4 Foreign Exchange Transactions

Assets and liabilities denominated in foreign currencies as on the balance sheet date have been converted into local currency at mid-point exchange rates published by Nepal Rastra Bank aﬅ er adjustment for eﬀ ective trading rate.

Net diﬀ erence arising from the conversion of foreign currency assets and liabilities is accounted for as revaluation gain/loss under Exchange Gain in Schedule 4.34. 25% of such revaluation gain is transferred to Exchange Fluctuation Reserve through Statement of Change in Equity as per NRB Directives.

Income realised from the diﬀ erence between buying and selling rates of Foreign Exchange is accounted for as trading gains and shown as “Gain/loss foreign exchange transaction" under "Net Trading Income" in Schedule 4.33

2.5 Functional and presentation currency

The Consolidated fi nancial statements are presented in Nepalese Rupees (NPR), the functional currency of Group entities. The Consolidated fi nancial statements are prepared in the formats implemented by Nepal Rastra Bank and the assets and liabilities are presented in the order of liquidity in the statement of fi nancial position. The Income and expenses are classifi ed ‘by nature’ in the presentation of statement of profi t or loss. All fi gures in the accounts have been rounded and consequently the sum of individual fi gures may deviate from the presented sum fi gure. Furthermore, all percentages are subject to possible rounding diff erences.

2.6 Signiﬁ cant accounting judgements and estimates

As part of the process of preparing the fi nancial statements in conformity with NFRS, the Bank’s management is required to make certain judgements, estimates and assumptions that may aff ect the Bank’s profi ts, its fi nancial position and other information presented in the Annual Report. These estimates are based on available information and the judgements made by the Bank’s management. Actual outcomes may deviate from the assessments made, and such deviations may at times be signifi cant.

The Bank uses various valuation models and techniques to estimate the fair values of assets and liabilities. There are signiﬁ cant uncertainties related to these estimates and these estimates are highly dependent on market data, such as the level of interest rates, currency rates and other factors. The uncertainties related to these estimates

NMB Annual Report-2018/19 101 are refl ected mainly in the statement of fi nancial position. The bank undertakes continuous development in order to improve the basis for fair value estimates, with regard to both modelling and market data. Changes in estimates resulting from refi nements in assumptions and methodologies are refl ected in the period in which the enhancements are fi rst applied. Judgements and estimates are also associated with impairment testing of loans and claims.

2.7 Change in Accounting Policies

The bank has changed its accounting policies when required, to ensure compliance with NFRS. The eﬀ ect of change in accounting policies at the date of transition has been given to the retained earnings (and reserves, if applicable)

2.8 Materiality and Aggregation

In compliance with Nepal Accounting Standard - NAS 01 (Presentation of Financial Statements), each material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or functions too are presented separately unless they are immaterial. Financial Assets and Financial Liabilities are off set and the net amount reported in the Statement of Financial Position only when there is a legally enforceable right to off set the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liability simultaneously. Income and expenses are not off set in the Statement of Profi t or Loss unless required or permitted by an Accounting Standard.

2.9 New Standards in Issue but not yet eﬀ ective

For the reporting of fi nancial instruments, NAS 32 Financial Instruments, Presentation, NAS 39 Financial Instruments Recognition and Measurements and NFRS 7 Financial Instruments – Disclosures have been applied. NRFS 9 has been complied for the classifi cation of Financial Instruments. A number of new standards and amendments to the existing standards and interpretations have been issued by IASB aﬅ er the pronouncements of NFRS with varying eff ective dates. Those become applicable when ASB Nepal incorporates them within NFRS.

Besides, IASB is yet to issue internationally applied standards namely NFRS 9 ‘Financial Instruments’, NFRS 15 – Revenue from Contracts with Customers and NFRS 16 – Leases

2.10 Basis for classiﬁ cation and measurement

Financial assets are measured at initial recognition at fair value, and are classifi ed and subsequently measured at fair value through profi t or loss (FVTPL), fair value through other comprehensive income (FVOCI) or amortized cost based on our business model for managing the fi nancial instruments and the contractual cash fl ow characteristics of the instrument.

The ﬁ nancial statements have been prepared on the historical cost basis, except for:

- As per NFRS 9 “Financial Instruments”, Investment Securities (investment in equity shares and mutual funds) are measured at fair value. - Derivative Financial Instruments are measured at fair value (FVTPL). - Non-derivative ﬁ nancial instruments at fair value through proﬁ t or loss are measured at fair value - Inventories are measured at cost or net realizable value whichever is lower.

102 www.nmbbanknepal.com - As per NAS 40 ‘Investment Property’ (land and building acquired as non banking assets) are measured at fair value. - As per NAS 19 “Employee Benefi ts”, Liabilities for employee defi ned benefi t obligations and liabilities for long service leave are measured at fair value.

Financial assets at amortised cost

An investment is classifi ed at “amortised cost” only if it is not designated as a FVTPL and both of the following criteria are met: the objective of the Bank’s business model is to hold the assets in order to collect the contractual cash fl ows, and the contractual terms of the fi nancial assets must give rise on specifi ed dates to cash fl ows that are only payments of principal and interest on the principal amount outstanding.

Financial assets at fair value

If either of the two criteria above is not met, the asset cannot be classiﬁ ed in the amortised cost category and must be classiﬁ ed at fair value.

Determination of fair value

The fair value of fi nancial instruments, including derivative instruments that are traded in a liquid market, is the bid or off ered closing price on the balance sheet date. Where the fair values cannot be derived from active markets, they are determined using a variety of valuation techniques which include the use of mathematical models. The input to these models is taken from observable market data where possible. Fair values are measured using diff erent valuation models and techniques. This process involves determining future expected cash fl ows, which can then be discounted to the balance sheet date. The estimation of future cash fl ows for these instruments is subject to assumptions on market data, the fair value estimate may therefore be subject to variations and may not be realisable in the market. Under diff erent market assumptions, the values could also diff er signifi cantly.

The Bank measures fair values using the following fair value hierarchy, which reﬂ ects the signiﬁ cance of the inputs used in making the measurements:

Level 1: Quoted market prices (unadjusted) in an active market for identical instruments.

Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments, quoted prices for identical or similar instruments in markets that are considered less than active or other valuation techniques where all signiﬁ cant inputs are directly or indirectly observable from market data.

Level 3: Valuation techniques using signifi cant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and where the unobservable inputs have a signifi cant eff ect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where signifi cant unobservable adjustments or assumptions are required to refl ect diff erences between the instruments.

NMB Annual Report-2018/19 103 2.11 Financial assets and ﬁ nancial liabilities

Financial assets refer to assets that arise from contractual agreements on future cash ﬂ ows or from owning equity instruments of another entity. Since ﬁ nancial assets derive their value from a contractual claim, these are non physical in form and are usually regarded as being more liquid than other tangible assets.

Financial liabilities are obligations that arise from contractual agreements and that require settlement by way of delivering cash or another fi nancial asset. Settlement could also require exchanging other fi nancial assets or fi nancial liabilities under potentially unfavourable conditions. Settlement may also be made by issuing own equity instruments.

2.12 Recognition and de-recognition of ﬁ nancial instruments

Financial instruments are recognised in the statement of ﬁ nancial position on a settlement date basis, except for derivative instruments, which are recognized on a trade date basis.

A fi nancial asset is derecognised when the contractual rights to the cash fl ows from the fi nancial asset expire.

A fi nancial liability is derecognised from the statement of fi nancial position when the obligation specifi ed in the contract is discharged, cancelled or expires.

2.13 Business Combination

The Group accounts for business combinations using the acquisition method when control is transferred to the Group as per NFRS 3. The consideration transferred in the acquisition is generally measured at fair value, as are the identiﬁ able net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in proﬁ t or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

2.14 Oﬀ setting

A fi nancial asset and a fi nancial liability are off set and the net amount recognised only where there is a legal right to do so and the intention is to settle on a net basis.

2.15 Cash and cash equivalents

Cash and cash equivalents comprise monetary assets and placements with original maturities of three months or less, calculated from the date the acquisition and placements were made.

Cash and cash equivalents are classiﬁ ed as ﬁ nancial asset and are measured at amortized cost in SoFP.

Restricted deposits are not included in cash and cash equivalents. These are measured at amortized cost and presented as a line item on the face of consolidated Statement of Financial Position (SoFP).

104 www.nmbbanknepal.com 2.16 Impairment

Impairment of ﬁ nancial assets

The Bank assesses at each reporting date whether there is objective evidence that a fi nancial asset or group of fi nancial assets is impaired. A fi nancial asset or a group of fi nancial 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 aﬅ er the initial recognition of the asset (a loss event), and that loss event (or events) has an impact on the estimated future cash fl ows of the fi nancial asset or group of fi nancial assets that can be reliably estimated.

The Bank considers the following factors in assessing objective evidence of impairment:

- a signifi cant fi nancial diffi culty of the issuer or obligor;

- a breach of contract, such as a default or delinquency in interest or principal payments;

- it becoming probable that the borrower will enter bankruptcy or other ﬁ nancial reorganization;

- Where observable data indicate that there is a measurable decrease in the estimated future cash fl ows from a group of fi nancial assets since the initial recognition of those assets, although the decrease cannot yet be identifi ed with the individual fi nancial assets in the group, including adverse changes in repayment patterns or economic conditions that correlate with defaults.

Assets carried at amortised cost

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

The recoverable value of loan is estimated on the basis of realizable value of collateral (value of collateral is considered aﬅ er hair cut prescribed by NRB) 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 ﬁ nancial assets with similar credit risk statistics and collectively assessed for impairment. The credit risk statistics for each group of the loan and advances are determined by management prudently being based on the past experience.

Subsequent reversal of impairment loss, due to factors such as an improvement in the debtor’s credit rating, is recognized in the statement of profi t or loss. The reversal shall not result in a carrying amount of the fi nancial asset that exceeds what the amortized cost would have been had the impairment not been recognized at the date the impairment is reversed. Financial assets (and the related impairment allowance accounts) are written off either partially or in full, when there is no realistic prospect of recovery. Where fi nancial assets are secured, this is generally aﬅ er receipt of any proceeds from the realization of security. If a future write–off is later recovered, the recovery is credited to the ’Income Statement’.

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. For individual impairment, bank considers Top 50 loan clients and loans above delinquency of 90 days.

NMB Annual Report-2018/19 105 2.17 Derivative assets and derivative liabilities

Derivative assets and derivative liabilities (derivatives) create rights and obligations that have the eff ect of transferring between the parties to the instrument one or more of the fi nancial risks inherent in an underlying primary fi nancial instrument. However, they generally do not result in a transfer of the underlying primary fi nancial instrument on inception of the contract, nor does such a transfer necessarily take place on maturity of the contract.

Derivative fi nancial instruments meet the defi nition of a fi nancial instrument and are accounted for as derivative fi nancial asset or derivative fi nancial liability measured at FVTPL and corresponding fair value changes are recognized in profi t or loss.

2.18 Deposits from customers and BFIs and Debt Securities

These are classiﬁ ed as ﬁ nancial liabilities measured at amortized cost.

2.19 Revenue recognition

Revenue is recognized only when it is probable that the economic beneﬁ ts associated with the transaction will ﬂ ow to the entity. In some cases, this may not be probable until the consideration is received or until an uncertainty is removed.

Revenue is derived substantially from banking business and related activities and comprises net interest income and non-interest income. Income is recognised on an accrual basis in the period in which it accrues. The Group applies NAS 18 – “Revenue” in the accounting of revenue, unless otherwise stated.

a. Net interest income Interest income and expenses are recognised in profi t or loss for all interest-bearing instruments on an accrual basis using the eff ective interest method. The eff ective interest rate is the rate that exactly discounts the expected estimated future cash payments and receipts through the expected life of the fi nancial asset or liability. Where fi nancial assets have been impaired, interest income continues to be recognised on the impaired value, based on the original eff ective interest rate.

The interest income has been recognized as per NRB Guidelines on Interest Income Recognition.

b. Fees and commission income Fees and commission income is generally recognised when the related services are provided or on execution of a signiﬁ cant act. Fees charged for servicing a loan are recognised as revenue as the service is provided.

c. Dividend Income Dividend is recognised as income when the right to receive the dividend is established. For bonus shares, the numbers of shares alone are increased without any change in the cost price of shares.

d. Net Trading Gain The Group presents all accrued interest, dividend, unrealized fair value changes and disposal gains or losses in respect of trading assets and liabilities under this head. The Group also presents foreign exchange trading gains or losses arising on foreign exchange buy and sell transactions under trading income.

106 www.nmbbanknepal.com 2.20 Interim Reports

Interim reports corresponding to the ﬁ nancial statements reported had been reported in accordance with the regulatory reporting requirements. Those statements have been published.

2.21 Discounting

Discounting has been applied where assets and liabilities are non-current and the impact of the discounting is material.

2.22 Limitation of NFRS implementation

Wherever the information is not adequately available and the cost to develop the same would exceed the beneﬁ t derived, such exception to NFRS implementation has been noted and disclosed in respective sections.

2.23 Signiﬁ cant changes from the policies adopted in the past

Signiﬁ cant changes from the accounting policies adopted under previous GAAP (erstwhile Nepal Accounting Standards and directives issued by Nepal Rastra bank) and the adoption of NFRS has been disclosed in the respective segments, including the impact.

2.24 Property, plant and equipment (PPE) and Intangible Assets a. Property, plant and equipment and Intangible assets (soﬅ ware) are stated at cost less accumulated depreciation (Cost Model) b. Land is not depreciated. Depreciation of others is charged to Statement of Proﬁ t and Loss on Straight Line method over the useful life of those assets. The estimated useful life of the assets are as follows:

Assets Estimated Life Rate of Depreciation Building 40 years 2.5% Offi ce equipment 7 years 14.28% Computers 5 years 20% Furniture & Fixtures 7 years 14.28% Vehicles 5 to 7 years 20%/ 14.28% Intangible Assets/soﬅ ware 5 Years c. Leasehold improvements are capitalised at cost and amortised over period of lease. d. Intangible assets (soﬅ ware) are capitalised and amortised over the life of assets determinable or best estimated. e. Depreciation on property, plant and equipment sold or disposed off during the year is charged up to the date of sales and gain or loss on the sales transaction is accounted for. f. Soﬅ ware costs are amortized over their estimated useful lives from the period of purchase. g. Assets with a unit value of NPR 10,000 or less are expensed-off during the year of purchase irrespective of its useful life.

NMB Annual Report-2018/19 107 2.25 Investment property

Investment properties are land or building or both other than those classiﬁ ed as property and equipment under NAS 16 – “Property, Plant and Equipment”; and assets classiﬁ ed as non-current assets held for sale under NFRS 5 – “Non-Current Assets Held for Sale and Discontinued Operations”. The Group has recognized as investment property all land or land and building acquired as non banking assets.

Non banking assets (only land and building) are initially recognized at fair value. Since it is not intended for owner- occupied use, a depreciation charge is not raised.

2.26 Retirement Beneﬁ ts

The Bank off ers retirement benefi ts to its confi rmed employee, mainly provident fund, gratuity and accumulated sick leave, all payable at the time of separation from service.

a. Provident fund

Provident fund is recognised at the time of contribution to the fund which is independent to the Bank.

b. Gratuity

Provision for gratuity is made on the basis of actuarial valuation carried out by an Actuary as per the provisions of Nepal Accounting Standards. At the time of separation from service, cash payments are made to the employees and the amount is computed as per the Bank's Policy.

c. Accumulated sick leave

Provision for accumulated sick leave is made on the basis of actuarial valuation carried out by an Actuary as per the provisions of Nepal Accounting Standards. At the time of separation from service, cash payments are made to the employees and the amount is computed as per the Bank's Policy.

d. Accumulated home leave

Provision for accumulated home leave is made on the basis of actuarial valuation carried out by an Actuary as per the provisions of Nepal Accounting Standards. At the time of separation from service or eligible accumulated leaves, cash payments are made to the employees and the amount is computed as per the Bank's Policy.

2.27 Operating Lease

Leases where a signifi cant portion of the risks and rewards of ownership are retained by the lessor, are classifi ed as operating leases. The Group has applied NAS 17 – “Leases” and expense is recognized to Statement of Profi t or Loss (SoPL) on straight line basis considering adjusted incremental rent over the lease period.

2.28 Income Tax a. Current Income Tax Provision for current income tax is made in accordance with the provisions of the prevailing Income Tax Act, 2058 and Rules framed there under.

108 www.nmbbanknepal.com b. Deferred Tax

Deferred tax is recognised on the diff erences between the carrying amount of assets and liabilities in the fi nancial statements and corresponding tax bases used in the computation provided on temporary diff erences arising between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements. Deferred income tax is determined by using tax rates (and laws) that have been enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised where it is probable that future taxable profi t will be available against which the temporary diff erences can be utilised. Deferred tax related to temporary diff erences in opening balances is credited or charged directly to equity and subsequent year diff erences are recognised in the income statement together with the deferred gain or loss.

2.29 Segmental Reporting

An operating segment is a component of the bank that engages in business activities from which it earns revenues and incurs expenses, including revenues and expenses that relating to transactions with any of the bank’s other components, whose operating results are reviewed by the management to make decision about resource allocation to each segment and assess its performance.

The Bank is organised for management and reporting purposes into segments such as: Retail, SME and MSME, Corporate, Deprived, Treasury and Others. Income tax is managed on a group basis and are not allocated to operating segments. All transactions between segments are conducted on an arm’s length basis, with inter-segment revenue and costs being eliminated in “Others”. Support costs are also allocated to Retail, Corporate, SME and MSME, Deprived, Treasury and others based on Management’s estimates of the beneﬁ ts accruing to these segments for the costs incurred.

2.30 Share capital and reserves

The Ordinary shares in the Bank are recognized at the amount paid per ordinary share. The holders of ordinary shares are entitled to one vote per share at general meetings of the bank and are entitled to receive the annual dividend payments. The various reserve headings are explained hereinaﬅ er: a. General reserve

The Bank is required to appropriate a minimum 20% of current year’s net profi t into this heading each year until it becomes double of paid up capital and then aﬅ er a minimum 10% of profi t each year. This reserve is not available for distribution to shareholders in any form and requires specifi c approval of the central bank for any transfers from this heading. b. Exchange equalization reserve

The Bank is required to appropriate 25% of current year’s total revaluation gain (except gain from revaluation of Indian Currency) into this heading.

NMB Annual Report-2018/19 109 c. Fair value reserve

This is a non-statutory reserve and is a requirement in the application of accounting policy for fi nancial assets. NFRS 9 requires that cumulative net change in the fair value of fi nancial assets measured at FVTOCI is recognized under fair value reserve heading until the fair valued asset is de-recognized. Any realized fair value changes upon disposal of the re-valued asset is reclassifi ed from this reserve heading to retained earnings.

d. Asset revaluation reserve

This is a non-statutory reserve and is a requirement in the application of accounting policy for non-ﬁ nancial assets such as property, equipment, investment property and intangible assets that are measured following a re-valuation model. The Bank does not have any amount to present under asset revaluation reserve.

e. Capital Adjustment Fund

This is a statutory reserve and is a compliance requirement of NRB circular 12/072/73. The Bank is required to appropriate an amount equivalent to 100% of capitalized portion of interest income on borrowing accounts where credit facility was rescheduled or restructured, following the aﬅ er eff ects of the great earthquake that struck the nation in April 2015. Fund in this account can be reclassifi ed to retained earnings upon full and fi nal repayment of the credit facility.

f. Corporate social responsibility fund

The Bank is required to appropriate an amount equivalent to 1% of net proﬁ t into this fund annually. The fund is created towards funding the Bank’s corporate social responsibility expenditure during the subsequent year. Balance in this fund is directly reclassiﬁ ed to retained earnings in the subsequent year to the extent of payments made under corporate social responsibility activities.

g. Investment adjustment reserve

The Bank is required to maintain balance in this reserve heading which is calculated at ﬁ xed percentages of the cost of equity investments that are not held for trading. Changes in this reserve requirement are reclassiﬁ ed to retained earnings.

h. Actuarial gain / loss reserve

This is a non-statutory reserve and is a requirement in the application of accounting policy for employee benefi ts. NAS 19 requires that actuarial gain or loss resultant of the change in actuarial assumptions used to value defi ned benefi t obligations be presented under this reserve heading. Any change in this reserve heading is recognized through other comprehensive income and is not an appropriation of net profi t.

i. Regulatory reserve

This is a non-free statutory reserve and is a requirement as prescribed in NRB directive. In the transition to NFRS from previous GAAP the Bank is required to reclassify all amounts that are resultant of re-measurement adjustments and that are recognized in retained earnings into this reserve heading. The amount reclassiﬁ ed to this reserve includes re-measurement adjustments such as interest income recognized against interest receivables, diﬀ erence in loan

110 www.nmbbanknepal.com loss provision as per NRB directive and impairment on loan and advance as per NFRS, amount equals to deferred tax assets, actuary loss recognized in other comprehensive income, amount of goodwill recognized under NFRS.

j. Debenture Redemption Reserve

The Bank is required to maintain a redemption reserve in respect of borrowing raised through debenture issuance. As per the terms of NRB approval relating to the Bank’s debenture issuance, the Bank is annually required to transfer 20% of the debenture’s face value to redemption reserve.

k. Employees training fund

The Bank is required to incur expenses towards employee training and development for an amount that is equivalent to at least 3% of the preceding year’s total personnel expenses. Any shortfall amount in meeting this mandatory expense requirement in the current year will have to be transferred to this reserve fund through appropriation of net proﬁ t and the amount shall accumulate in the fund available for related expenses in the subsequent year. Balance in this fund is directly reclassiﬁ ed to retained earnings in the subsequent year to the extent of expenses made for employees training related activities.

2.31 Stationery

Stationery purchased are stated at cost and charged to revenue at the time of consumption.

2.32 Provisions, Contingent Liabilities and Contingent Assets

The Bank creates a provision when there is a present obligation as a result of past events that probably requires an outfl ow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outfl ow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outfl ow of resources is remote, no provision or disclosure is made.

Contingent assets are not recognised in the ﬁ nancial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic beneﬁ t will arise, the asset and related income are recognised in the period in which the change occurs.

2.33 Events aﬅ er the Balance Sheet Date

Events aﬅ er the balance sheet date are those events, favourable and unfavourable, that occur between the balance sheet date and the date when the ﬁ nancial statements are authorised for issue.

Appropriate adjustments in the fi nancial statements and disclosures in notes to accounts have been made for all material and signifi cant events that have occurred between the balance sheet date and date when the fi nancial statements have been authorised for issue required as per Nepal Financial Reporting Standards (NFRS)

3. Rounding oﬀ and Comparative Figures

The fi nancial statements are presented in Nepalese Rupees, rounded off to the nearest rupee. Previous year's fi gures have been reclassifi ed wherever necessary in order to facilitate comparison.

NMB Annual Report-2018/19 111 Additional Disclosures - Financial Year 17 July 2018 to 16 July 2019 (1 Shrawan 2075 to 31 Ashad 2076)

1. Provision for Bonus

Provision for bonus has been calculated and provided at 10% of net proﬁ t before bonus and tax.

2. General Reserve

As per section 44 of the Banks and Financial Institutions Act 2063, 20% of the current year’s net proﬁ t amounting NPR 451,455,205 has been transferred to General Reserve.

3. Exchange Fluctuation Reserve

As per Section 45 of the Banks and Financial Institutions Act, 2063 25% of the revaluation gain amounting to NPR 22,003,093 has been transferred to Exchange Fluctuation Reserve.

4. Exchange Fluctuation Income

The Bank earned a total exchange ﬂ uctuation income of NPR 440,061,862 out of which a gain of NPR 202.11 Million was generated through NDF contracts transactions. Income realised from the diﬀ erence between buying and selling rates of Foreign Exchange is accounted for as trading gains and shown as “Gain/loss foreign exchange transaction” under “Net Trading Income” in Schedule 4.33 and income realized through revaluation gain is shown under Foreign exchange revaluation gain in other operating income in schedule 4.34.

5. Investment Adjustment Reserve

The investments are valued at fair value required as per NFRS and hence only 100% of investment amount for CEDB Hydro Fund under ‘Available for Sale’ category totalling to NPR 10,000,000 has been set aside as Investment Adjustment Reserve.

Particulars Investment Amount IAR % IAR Amount IAR not required to be created 204,387,000 0% -

100% IAR required 10,000,000 100% 10,000,000

Total 214,387,000 10,000,000

112 www.nmbbanknepal.com 6. Debenture Redemption Reserve

As required by NRB directive, an amount equal to NPR 90,452,511 has been appropriated to Debenture Redemption Reserve during the year. The total balance in Debenture Redemption Reserve as at 16 July 2019 is NPR 400,000,000.

Debenture – 1 Debenture Amount 500,000,000 Issued Date 18-Feb-15 Maturity Date 21-Aug-20 Beginning Year Excluding Issue Year 2015-16 Final Year Excluding Redemption Year 2019-20 No. of Years for Reserve Creation 5 Years Debenture Reserve per year 100,000,000 Current Year 2018-19 No. of Years for Reserve Creation till FY 2018-19 4 Years Redemption Reserve required for 4 Years (A) 400,000,000 Debenture – 2 Debenture Amount 1,684,505,000 Issued Date 12-Apr-19 Maturity Date 12-Apr-29 Beginning Year Excluding Issue Year 2019-20 Final Year Excluding Redemption Year 2027-28 No. of Years for Reserve Creation 9 Debenture Reserve per year 187,167,222.22 Current Year - Issue Year 2018-19 No. of Years for Reserve Creation till FY 2018-19 None Redemption Reserve required (B) - Total Reserve (A)+(B) 400,000,000 Reserve created till FY 2017-18 309,547,489 Additional Reserve for this year 90,452,511

NMB Annual Report-2018/19 113 7. Corporate Social Responsibility (CSR) Fund

The bank has apportioned NPR. 22,572,760 /- as CSR fund which is equivalent to 1% of Net Proﬁ t of the year. The fund has been created as per the requirement of NRB Circular Bai.BI.Ni.Bi./Niti/Paripatra/KaKhaGa/11/073/74 dated 2073/10/12. The fund so created shall be used for CSR activities of the Bank in the next ﬁ scal year as per bank’s CSR policy. The detailed movement of reserve is given below:

Particulars NPR A. Net proﬁ t for FY 2075/76 2,257,276,027

B. 1% of net proﬁ t appropriated to CSR fund 22,572,760

C. Opening CSR fund 31,548,400

D. CSR expense incurred for FY 2075/76 5,678,558

E. Closing CSR Reserve FY 2075/76 (B+C-D) 48,442,603

F. Net Movement (E-C) 16,894,202

8. Staff Skill Development (SSD) Fund The bank has expensed NPR. 28,304,668 under staff training for the FY 2075/76 which is more than the 3% of the total employee cost of the previous FY 2074/75. Hence, no fund has been apportioned to “Staff Skill Development Fund” as per NRB Circular Bai.BI.Ni.Bi./Niti/Paripatra/KaKhaGa/10/073/74 dated 2073/09/26. The detailed movement of reserve is given below:

Particulars NPR A. Staﬀ Expenses of FY 2074/75 736,423,762

B. 3% of the above to be expensed in 22,092,713 FY 2075/76

C. Training Expenses for FY 2075/76 28,304,668

D. Excess/(Shortfall) (C-B) 6,211,955

E. Opening SSDF -

F. Transfer to SSD Fund -

9. Event aﬅ er reporting period

The Board of Directors in its meeting dated 10 November 2019 has proposed the issue of 21 % Stock Dividend and 14% cash dividend (including for tax purpose) for each share held. The dividend shall be distributed from the retained earnings available as on Ashad end 2076 of NMB Bank Ltd on the paid up capital of NPR. 11,529,741,708 (including adjusted paid up capital of erstwhile Om Development Bank Ltd.). This is to be approved at the forthcoming Annual General Meeting of the Bank.

114 www.nmbbanknepal.com 10. Unpaid Dividend

As on the balance sheet date, unpaid dividends of over ﬁ ve years amount to NPR 5,128,793.31 and total unpaid dividends also amounts to NPR 5,128,793.31. Subsequently the Bank deposits the unclaimed amounts in Investor’s Protection Fund as required by the Companies Act.

11. Earnings per Share

Basic earnings per equity share are computed in accordance with NAS 26 Earnings per Share. Basic earnings per equity share are computed by dividing net proﬁ t aﬅ er tax by the weighted average number of equity shares outstanding during the year. Bonus shares, also known as scrip dividends, involve the issue of shares without any consideration. Since the bonus shares do not change the resources available to the entity to earn a return for the shareholders (as in the case of shares issued for cash) the eﬀ ect of change in number of shares in the EPS calculation is cancelled for the year in which bonus issue takes place and as well as in the prior periods presented. The EPS has also been restated in Principal Indicators.

The following table sets forth, for the periods indicated, the computation of earnings per share.

Particulars YE Ashad 2076 YE Ashad 2075 Weighted average no. of equity shares outstanding (Restated) 95,900,157 84,797,652

Net proﬁ t 2,257,276,027 1,853,792,753

Basic earnings per share 23.54 21.86

Nominal value per share 100 100

12. Principal Indicators

The principal indicators of the bank for the past 5 years are as follows:

S.No Particulars Indicators FY 2071/72 FY 2072/73 FY 2073/74 FY 2074/75 FY 2075/76 Percent of Net Proﬁ t/ 1 Percent 18.42 20.90 20.52 18.09 18.06 Gross Income

Earnings Per Share 2 (Restated for previous Rs. 21.48 22.10 22.24 21.86 23.54 years)

3 Market Value Per Share Rs. 507 810 545 358 382

4 Price Earnings Ratio Ratio 20.24 29.15 20.27 12.48 16.23

Dividend (including bonus) 5 Percent 8.42 20.00 15.79 30.00 35.00 on Share Capital

Cash Dividend on Share 6 Percent 0.42 1.00 0.79 20.00 14.00 Capital

Interest Income/Loans & 7 Percent 7.86 7.16 9.26 10.78 11.17 Advances

NMB Annual Report-2018/19 115 S.No Particulars Indicators FY 2071/72 FY 2072/73 FY 2073/74 FY 2074/75 FY 2075/76 Staﬀ Expenses/Total 8 Percent 48.66 57.15 55.03 58.09 61.52 Operating Expenses

Interest Expenses on Total 9 Percent 3.63 3.08 4.71 6.76 6.58 Deposit and Borrowing

Exchange Gain/Total 10 Percent 0.29 0.21 0.24 0.27 0.32 Assets

Staﬀ Bonus/Total Staﬀ 11 Percent 35.32 34.01 34.77 38.72 34.21 Expenses

Net Proﬁ t/Loan and 12 Percent 1.81 2.05 2.34 2.43 2.42 Advances

13 Net Proﬁ t/Total Assets Ratio 1.21 1.49 1.69 1.65 1.67

14 Total Credit/Deposit Percent 75.32 84.07 85.50 90.46 94.61

Total Operating Expenses/ 15 Percent 1.36 1.48 1.69 1.56 1.70 Total Assets

Adequacy of Capital Fund 16 on Risk Weighted Assets

a) Core Capital Percent 8.84 9.34 12.39 14.78 13.09

b) Supplementary Capital Percent 2.29 1.64 1.22 0.97 2.34

c) Total Capital Fund Percent 11.13 10.98 13.61 15.75 15.43

17 Liquidity (CRR) Ratio 13.32 10.81 7.72 6.68 4.19

Non-performing credit/ 18 Percent 0.42 1.81 1.68 0.88 0.82 Total credit

19 Base Rate Percent 7.89 6.68 10.12 10.70 9.86

Weighted Average Interest 20 Percent 4.19 4.31 3.89 3.45 3.54 Rate Spread

21 Return on assets Percent 1.40 1.92 1.82 1.80 1.83

22 Return on Equity Percent 16.40 21.96 16.49 13.54 13.32

23 Cost to Income Ratio Percent 37.35 36.49 36.71 36.90 35.01

24 Cost of Fund (YTD) Percent 4.55 3.99 5.06 7.46 7.26

25 Average Yield (YTD) Percent 8.74 8.30 8.95 10.91 10.80

26 Book Net-worth Rs. in ‘000 3,296,447 6,861,160 10,627,149 16,489,809 17,403,014

27 Total Shares Nos. in ‘000 24,000 44,869 64,618 76,033 96,182

28 Total Staﬀ Number 357 755 918 1,080 1,120

29 No of Branches Number 29 69 80 110 110

30 No of ATMs Number 37 49 66 96 103

116 www.nmbbanknepal.com 13. Loans and Advances Written Oﬀ

The Bank has written oﬀ loans and advances amounting to NPR 14,622,195 (excluding interest write oﬀ ) the detail of which is as follows:

Date of Accrued S.No Name of Clients Facility Principal Written oﬀ Interest China Hygienic Meat Production & 1 Overdraﬅ Loan 17/02/19 14,622,195 0.00 Suppliers Pvt. Ltd.

However, the bank has also recovered amount NPR. 17,585,901 during the fi scal year from loan and interest write off amount of previous fi scal years.

14. Other Assets Written Oﬀ

The Bank did not write oﬀ any balance on Other Assets.

15. Summary of Changes in Dues to customers during the year

The ﬁ nancial growth of the dues to customers (except dues to BFI’s) during the year is given below:

Amount in NPR

Particulars FY End 2076 FY End 2075 Increase/(Decrease) Term deposits 49,404,840,926 45,833,759,771 3,571,081,155

Call deposits 9,146,310,257 7,641,835,785 1,504,474,472

Current deposits 5,683,120,598 4,790,516,782 892,603,816

Saving deposits 28,196,756,446 19,861,381,189 8,335,375,257

Other 5,461,273,739 5,843,373,692 (382,099,953)

Total 97,892,301,967 83,970,867,219 13,921,434,748

16. Agency Account

More than 1 year less Particular Less than 1 Year More than 3 years Total than 3 years Agency Accounts 521,093,280 150,000 - 521,243,280

Inter branch - - - -

NMB Annual Report-2018/19 117 17. Capitalization of Interest

During the ﬁ scal year, the Bank has recognised interest income of NPR 105,179,647.74 from capitalization of interest during moratorium period of ﬁ ve separate projects. These capitalizations have been approved/mandated by the NRB.

S.No. Borrower Name Total Capitalization

1 Bindhyabasini Hydropower Development Company Pvt. Ltd. 10,409,773.90

2 Eastern Hydro Power Ltd. 6,090,589.18

3 Kalanga Hydro Pvt. Ltd. 26,968,533.37

4 Liberty Energy Company Ltd. 15,755,847.46

5 Upper Solu Hydro Electric Company Ltd. 45,954,903.83

Total 105,179,647.74

18. Dividend Income During the ﬁ scal year, the Bank has earned following dividend incomes from its investments:

Particulars Amount (NPR)

Karja Suchana Kendra FY 2073/74 178,500

Karja Suchana Kendra FY 2074/75 267,750

Mero Microﬁ nance Bittiya Sanstha Limited FY 2074/75 2,002,000

Nepal Clearing House Limited FY 2074/75 906,788

Laxmi Laghubitta Bittiya Sanstha Limited FY 2074/75 110

Butwal Power Company Limited FY 2074/75 7,509,212

NMB Capital FY 2074/75 38,000,000

Rural Microﬁ nance Laghubitta Bittiya Sanstha Limited FY 2074/75 5,670

Nepal Stock Exchange Ltd. 45,466

NMB Sulav Investment Fund - FY 2074/75 22,105,262

TOTAL 71,020,758

118 www.nmbbanknepal.com 19. Classiﬁ cation of Assets and Liabilities based on Maturity (As per yearly NRB Report)

Amount in NPR Million 1-90 91-180 181-270 271-365 Over 1 Total S.N. Particulars Days Days Days Days Year Amount Assets 1 Cash Balance 2,452 - - - - 2,452 2 Balance with Banks & FIs 9,688 - - - - 9,688 3 Investment in Foreign Banks 3,189 318 329 110 - 3,946 4 Call Money ------5 Government Securities 339 886 293 122 7,644 9,284 6 Nepal Rastra Bank Bonds ------7 Inter Bank & FI Lending 3,053 - - - - 3,053 8 Loans & Advances 26,845 14,052 5,709 4,117 41,164 91,887 9 Interest Receivable 131 - - - - 131 10 Reverse Repo ------Receivables from other 11 ------Institutions under Commitment Payment to be made for facilities 12 22,811 10,115 2,973 4,143 7,635 47,677 under s.no 20,21 & 22 13 Others ------Total Assets (A) 68,508 25,371 9,304 8,492 56,443 168,118 Liabilities 14 Current Deposits 7,837 - - - - 7,837 15 Saving Deposits 10,732 1,043 1,043 1,101 23,967 37,886 16 Fixed Deposits 14,162 12,026 9,025 7,297 6,894 49,405 17 Debentures - 2,185 2,185 18 Borrowings: 42 544 - - 3,468 4,053 (a) Call/Short Notice ------(b) Inter-bank/Financial - - - - 3,468 3,468 Institutions (c) Reﬁ nance 42 544 - - - 585 (d) Others ------19 Other Liabilities and Provisions 793 102 102 102 3,149 4,247 (a) Sundry Creditors 70 - - - - 70 (b) Bills Payable 96 - - - - 96 (c) Interest Payable 521 - - - - 521 (d) Provisions 4 - - - 166 170 (e) Others 102 102 102 102 2,983 3,389

NMB Annual Report-2018/19 119 Payable to other institutions 20 1,096 29 - - - 1,124 under Commitment 21 Unutilized Approved Facilities 4,332 - - - - 4,332 Letter of Credit/Guarantee (Net 22 17,383 10,087 2,973 4,143 7,635 42,221 of Margin) 23 Repo ------Payment to be made for facilities 24 ------under S.No 11 25 Others ------Total Liabilities (B) 56,376 23,830 13,143 12,643 47,298 153,290 Net Financial Assets (A-B) 12,132 1,541 (3,839) (4,151) 9,145 14,829 Cumulative Net Financial 12,132 13,673 9,834 5,683 14,829 - Assets

20. Summary of concentration of Exposures

Amount in NPR

Particulars Loans, and Advance Deposit Contingent Total amount as at 16 July 2019 91,886,954,994 98,516,666,963 44,144,526,363

Highest exposure to single unit 4,758,287,064 4,991,647,889 6,168,537,870

Highest % of exposure to single 5.18% 5.07% 13.97% unit

21. Borrowing by the Bank against the collateral of own assets

Borrowing by the Bank against the collateral of own asset is NIL.

22. Transactions in Bullion

The Group deals in bullion (Gold/Silver) by holding stock on consignment basis on behalf of suppliers as per the arrangement. The value of consignment as on balances sheet date is 228,747,129 and has been reﬂ ected under “Advance Gold and silver” (Gold Consignment)” in Schedule 4.16. Transaction of gold and silver are carried out as per the NRB Directives.

23. Capital Construction

There are no capital constructions (pending capitalization) as at the end of the current ﬁ scal year.

120 www.nmbbanknepal.com 24. Loan Impairment

The bank maintains an allowance for credit losses relating to on-balance sheet exposures of loans and advances.

Loans which are individually signifi cant (the threshold being selected to cover up top 50 fi les, fi les under 50% and 100% provision and fi les with special asset management department) are assessed individually for objective indicators of impairment. A loan is considered impaired when it is determined that bank will not be able to collect all amounts due according to the original contractual terms. Credit exposures of individually signifi cant loans are evaluated based on factors including the borrower’s overall fi nancial condition, resources and payment record, and where applicable, the realizable value of any collateral. If there is evidence of impairment leading to an impairment loss, then the amount of the loss is determined as the diff erence between the carrying value of the loan, including accrued interest, and the estimated recoverable amount. The estimated recoverable amount is measured as the present value of expected future cash fl ows discounted at the loan’s original eff ective interest rate, including cash fl ows that may result from the realization of collateral less costs to sell.

Loans which are not individually signiﬁ cant, or which are individually assessed and not determined to be impaired, are collectively assessed for impairment. For the purposes of a collective evaluation of impairment, loans are grouped on the basis of similar credit risk characteristics, taking into account loan type, past due status and other relevant factors viz. OD Loan, Working Capital Loan, Term Loan and Retail EMI. The collective impairment allowance is determined by reviewing factors including historical loss experience, which takes into consideration historical probabilities of default, loss given default and exposure at default.

The impairment status as per para 63 of NAS 39 is given below:

Particulars Year ended 31 Ashad 2076 Year ended 32 Ashad 2075 a. Individual Impairment 752,441,136 896,307,701

b. Collective Impairment 150,255,194 74,395,715

Total 902,696,330 970,703,416

The Loss given default status (LGD) for impairment calculation purpose is given below:

Particulars Year ended 31 Ashad 2076 Year ended 32 Ashad 2075 OD Loan 19% 21%

Term Loan 4% 5%

Retail EMI 19% 22%

Working Capital Loan 25% 28%

25. Carve-outs in NFRS

Upon the recommendation from Accounting Standard Board-Nepal, the Institute of Chartered Accountants of Nepal (ICAN) has issued following carve-outs for the implementation of NFRS and has prescribed alternative treatments as set out below:

NMB Annual Report-2018/19 121 a. NFRS 10 – “Consolidated Financial Statements”

The holding company can carve out to prepare consolidated ﬁ nancial statements using uniform accounting policies for like transactions and other events in similar circumstances as speciﬁ ed in para 19 of NFRS 10 unless it is impracticable to do so.

The Bank and its both Subsidiaries have adopted uniform accounting policy based on NFRS for like transactions and other events in similar circumstances.

b. NAS 39 – “Financial Instruments: Recognition and Measurements”

This is the carve out from the requirement to determine impairment loss on fi nancial assets – loans and advances by adopting the ‘Incurred Loss Model’ as specifi ed in para 63 of NAS 39 unless the entity is a bank or a fi nancial institution registered as per Bank and Financial Institutions Act 2073. Such entities shall measure impairment loss on loans and advances at the higher of:

- amount derived as per norms prescribed by Nepal Rastra Bank for loan loss provisioning; and

- amount determined as per para 63 of NAS 39 adopting Incurred Loss Model

This is the mandatory carve out. Hence, the Group has recognized impairment loss on loans and advances at the higher of the amount derived as per prudential norms speciﬁ ed in NRB directive and the amount derived from incurred loss model as speciﬁ ed in para 63 of NAS 39 as given below:

Particulars Year ended 31 Ashad 2076 Year ended 32 Ashad 2075 a. Impairment on Loan as per Para 63 902,696,330 970,703,416

b. Loan Loss Provision as per NRB 1,398,925,416 1,232,652,783

Higher of a and b 1,398,925,416 1,232,652,783

The Group has recognized impairment loss on other ﬁ nancial assets measured at amortized cost in accordance with para 63 of NAS 39.

c. NAS 39 – “Financial Instruments: Recognition and Measurements”

This is the carve out from the requirement to incorporate all fees and points paid or received under contractual terms of a fi nancial instrument in the calculation of ‘Eff ective Interest Rate’ for the fi nancial instrument as specifi ed in para 9 of NAS 39 and also carve out from the requirement to recognize interest income on a fi nancial asset or a group of similar fi nancial assets, which has been written down as a result of an impairment loss, by applying the rate of interest used to discount the asset’s future cash fl ows for the purpose of measuring its impairment loss as specifi ed in para 9 of NAS 39 unless it is immaterial or impracticable to determine reliably.

The Group has opted this carve out and hence has excluded the full amount of upfront loan management fees or commission received on loans and advances in the calculation of eff ective interest rate for the loan. The upfront fees and commission are recognized as income in the same period the loan is approved. The Group has recognized interest income on impaired fi nancial asset by applying the original eff ective interest rate to the gross carrying amount of a fi nancial asset.

122 www.nmbbanknepal.com 26. Risk Management

Risk Management Structure NMB Board is the ultimate authority to oversee overall risk management of the bank by establishing risk management strategies, appropriate risk appetite, and ensuring the risk management policies, procedures and standards are adequate and is eﬀ ectively implemented. Sound risk management system in the bank is established through formation of Board level Risk Management Committee and Audit committee; management level Asset and Liability Committee, Credit Risk Management Committee, Operational Risk Management Committee, E&S (Environmental and Social) Committee, Credit Recovery Committee and Corporate Governance Committee. In this structure, new/revised policies and standards, reports on risk management, portfolio analysis, stress testing, investment, liquidity, capital adequacy, industry/market analysis, and critical risk issues identiﬁ ed are escalated to Risk Management Committee for review and decision.

Risk management structure in the bank’s Organogram:

Risk Governance

The bank aspires to eﬃ ciently manage various risks that arise during business process through formulation and implementation of Risk Management Framework. Risk Governance at the bank is primarily based on following principles:

1) Risk Appetite Determination, 2) Pervasive Risk Culture, 3) Eﬀ ective Communication/Reporting, 4) Eﬀ ective Functional Structure, Policies, Procedures, and MIS, adequate infrastructure and resources for Risk Management,

Board of Directors

Risk Management Human Resource Asset Laundering Audit Committee Committee (RMC) Committee Prevention Committee

Chief Executive Officer Assets & Liability (CEO) Committee

Operational Risk Chief Risk Officer (CRO) Management Committee

Pricing Committee

Legal & Compliance Department Credit Risk Management Operational & Market IT and Information E&S Risk Management Department Risk Department Security Risk Department Credit Risk Management Committee

E&S Committee Corporate Governance Committee

Corporate Information Security Committee

NMB Annual Report-2018/19 123 Risk governance structure, i.e. the responsibility for maintaining risk within the banks risk appetite is cascaded down from the Board to the respective Committees and then to appropriate functional bodies in organizational structure.

In addition, the bank as an active member of the Global Alliance for Banking on Values (GABV) strives for delivering sustainable economic, social and environmental development with a focus on helping individuals fulﬁ l their needs and build stronger communities.

Credit Risk Management in NMB Bank: Credit Risk refers to the potential loss due to failure of counterparty to meet its obligations in accordance with the terms specifi ed in the credit agreements. Credit Policy, Credit Risk Management Framework, Credit Process Manual, Product Papers and various other credit related documents in place provides the fi rm foundation for a strong credit risk management environment in the bank by defi ning clear roles and responsibilities of various functions and risk takers in Credit system. The key independent units responsible for ensuring eff ective Credit Risk Management in the bank are Credit Risk Management Department, Credit Administration and Control Department, Special Assets Management Department and Business Segments.

A thorough analysis of the borrower and the industry in which the borrower operates is ensured prior advancing credit facilities. The Bank also has an internal credit risk rating procedure in place to categorize customers in diff erent risk profi les and formulate appropriate account strategies. The Bank primarily focuses on ensuring prudent fi nancing requirements of the client and the client’s capacity to repay the debt obligation on time.

Bank has a product wise and industry/sector wise portfolio and NPL thresholds to monitor the quality of loan portfolio and manage the concentration risk. These thresholds are reviewed on periodical basis in Credit Risk Management Committee and Risk Management Committee in quarterly interval for required actions/strategic decisions.

Market Risk and Operation Risk Management in NMB Bank: Market and Operation Risk management in Nepalese Banks has been a newer challenge. In the times of volatility and ﬂ uctuations in the market, NMB Bank needs to prove its determination by withstanding the market variations and achieve sustainability in terms of growth as well as to have a stable share value. Hence, an essential component of enhanced risk management framework would be to mitigate all the risks and rewards of the products and services oﬀ ered by the bank.

NMB has passed through a monumental change aﬅ er the merger with three Development Banks and one Finance Company. NMB has taken strategic focus on digitization and technological advancement to enhance banks services as well as risk management.

NMB ensures parity between risk and return and hence, management of risk by incorporating a set of systematic and professional methods especially those deﬁ ned by the Basel III becomes an essential requirement for us.

In the course of operations, the bank is invariably faced with diff erent types of risks that may have a potentially negative eff ect on the business. NMB Bank’s risk management approach includes risk identifi cation, measurement and assessment, and minimizes impact on the fi nancial result and capital of the bank.

124 www.nmbbanknepal.com Market risk includes interest rate and foreign exchange risk.

Interest rate risk is the risk of negative eﬀ ects on the ﬁ nancial result and capital of the bank as a result of changes in interest rates.

The bank’s products are mostly based on fl oating interest rate. Only fi xed deposits are with fi xed interest rate. In Nepalese local market, short term movement in interest rate is negligible. Asset and Liability Committee (ALCO) monitors the interest rate movement on regular basis.

Foreign exchange risk is the risk of negative eﬀ ects on the ﬁ nancial result and capital of the bank caused by changes in exchange rates.

The foreign exchange risk of the bank is minimal as all the transactions are carried out on behalf of the customers against underlying remittances and trade transactions.

Operational risk is the risk of negative eﬀ ects on the ﬁ nancial result and capital of the bank caused by omissions in the work of employees, inadequate internal control procedures and processes, inadequate management of information and other systems, and unforeseeable external events.

NMB Bank has independent department to look aﬅ er operational risk wherein Operational Risk Management Committee meets on monthly basis to discuss and plan the way forward to mitigate potential operational risk identiﬁ ed.

Bank has developed and adhered to Minimum Control Standards and Incident Reporting Guidelines along with Whistle Blowing Policy to identify potential operational risks. Operational Risk Department independently assess each incident/ event/cause to measure the risk grade which is ultimately discussed/ analyzed further in Operational Risk Management Committee to put appropriate controls in place. If required, the incident/event/cause along with the risk assessment, probability and impact is escalated further to Risk Management Committee or the Board of the Bank. Apart from that, Operational Risk Unit conducts branch/ department visits to monitor/ review the branches and departments and also to train/ create awareness on operational risk.

Liquidity Risk Liquidity risk is the potential event where the Bank either does not have suffi cient liquid fi nancial resources available to meet all its obligations as they fall due, or can only access these fi nancial resources at excessive cost. The Liquidity Risk Framework governs liquidity risk management and is managed by ALCO. In accordance with that policy, the Bank maintains a liquid portfolio of marketable securities as a liquidity buff er.

Other Risk Management of other risk such as Reputational, Legal and Compliance, Human Resource (HR) etc. is equally pertinent as the bank grows. The bank has separate department to oversee Legal and Compliance issues. HR Department and Board level HR Committee is responsible for all HR functions and related risk management. The bank has also setup dedicated Oﬃ cers to manage Reputational and other risks.

NMB Annual Report-2018/19 125 Internal Control

The Board and the management is committed in managing risks and in controlling its business and fi nancial activities in a manner which enables it to maximize profi table business opportunities, avoid or minimize risks which can cause potential loss or reputational damage to the bank, ensure compliance with applicable laws and regulations and enhance resilience to external events. To achieve this, bank has established set of policies and procedures for risk identifi cation, risk evaluation, risk mitigation and control/monitoring.

The eﬀ ectiveness of the Company’s internal control system is reviewed regularly by the Board, Risk Management Committee, Management and Internal Audit.

The Internal Audit monitors compliance with policies/standards and the eff ectiveness of internal control structures across the Company through its program of business/unit audits. The Internal Audit function is focused on the areas of greatest risk as determined by a risk-based assessment methodology. Internal Audit reports are periodically forwarded to the Audit Committee. The fi ndings of all audits are reported to the Chief Executive Offi cer, department heads and branch managers for initiating immediate corrective measures

27. Categories of Financial Instruments and Fair Value Hierarchy

Assets and liabilities carried at fair value or for which fair values are disclosed have been classifi ed into three levels according to the observability of the signifi cant inputs used to determine the fair values. Changes in the observability of signifi cant valuation inputs during the reporting period may result in a transfer of assets and liabilities within the fair value hierarchy. The Bank recognises transfers between levels of the fair value hierarchy when there is a signifi cant change in either its principal market or the level of observability of the inputs to the valuation techniques as at the end of the reporting period.

Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 valuations are those with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and ﬁ nancial instruments valued using models where all signiﬁ cant inputs are observable.

Level 3 portfolios are those where at least one input, which could have a signiﬁ cant eﬀ ect on the instrument’s valuation, is not based on observable market data.

Financial instruments are measured on an ongoing basis either at fair value or at amortized cost. The summary of signifi cant accounting policies describes how the classes of fi nancial instruments are measured, and how income and expenses, including fair value gains and losses, are recognized. The following table analyses the carrying amounts of the fi nancial instruments by category as defi ned in NAS 39 and by headings of the Statement of Financial Position.

126 www.nmbbanknepal.com The Hierarchy of fair value measurement is given below:

Fair value As at As at Particulars Hierarchy (Level) As at 31 Ashad 2076 As at 32 Ashad 2075 Carrying Value Fair value Carrying Value Fair value FVTPL Other trading 3 340,390,000 340,390,000 321,720,000 321,720,000 assets Derivative ﬁ nancial 1 8,595,482,282 8,595,482,282 7,506,751,485 7,506,751,485 instruments Subtotal 8,935,872,282 8,935,872,282 7,828,471,485 7,828,471,485 FVTOCI Quoted Equities 1 593,366,539 593,366,539 539,086,827 539,086,827 Unquoted 3 31,995,900 31,995,900 14,392,000 14,392,000 Equities Subtotal 625,362,439 625,362,439 553,478,827 553,478,827 Grand-Total 9,561,234,721 9,561,234,721 8,381,950,312 8,381,950,312 Amortized cost Cash and cash 3 8,096,354,503 8,096,354,503 5,180,404,105 5,180,404,105 equivalent Due from Nepal 3 10,829,181,584 10,829,181,584 7,260,194,560 7,260,194,560 Rastra Bank Placement with 3 2,172,967,239 2,172,967,239 276,407,171 276,407,171 BFI’s Loan and advances to B/ 3 3,317,961,987 3,317,961,987 2,497,567,769 2,497,567,769 FIs Loans and advances to 3 88,485,031,394 88,485,031,394 72,711,771,766 72,711,771,766 customers Investment securities 3 9,690,988,576 9,690,988,576 8,894,967,898 8,894,967,898 (except equity instruments) Subtotal 122,592,485,282 122,592,485,282 96,821,313,269 96,821,313,269 Total of 132,153,720,004 132,153,720,004 105,203,263,581 105,203,263,581 Financial Assets FVTPL/FVTOCI Liability for 3 59,445,250 59,445,250 60,864,641 60,864,641 employees DBO Subtotal 59,445,250 59,445,250 60,864,641 60,864,641 Amortized cost Due to Bank and Financial 3 624,364,996 624,364,996 1,036,268,951 1,036,268,951 Institutions Due to Nepal 3 3,203,523,072 3,203,523,072 660,071,641 660,071,641 Rastra Bank Deposits from 3 97,892,301,967 97,892,301,967 83,970,867,219 83,970,867,219 customers Borrowing 3 3,468,060,000 3,468,060,000 - -

NMB Annual Report-2018/19 127 Other liabilities 3 1,846,937,438 1,846,937,438 1,140,225,221 1,140,225,221 Debt securities 3 2,239,236,412 2,239,236,412 517,547,945 517,547,945 issued Subtotal 109,274,423,885 109,274,423,885 87,324,980,977 87,324,980,977 FVTPL Derivative ﬁ nancial 1 8,458,374,429 8,458,374,429 7,477,483,892 7,477,483,892 instruments Subtotal 8,458,374,429 8,458,374,429 7,477,483,892 7,477,483,892 Total of Financial 117,792,243,564 117,792,243,564 94,863,329,510 94,863,329,510 Liabilities

The details of equity instruments with fair valuation hierarchy are as follows:

Fair NMB Valuation Hierarchy Particulars As at 31 Asar 2076 As at 32 Asar 2075 Cost Fair Value Cost Fair Value Level 1. Investment in quoted equity shares 1.1 United Insurance Co. (Nepal) Limited 211,300 246,000 211,300 258,600 Level 1 1,440 Promoter shares of Rs 100 each fully paid up 120 Ordinary shares of Rs 100 each fully paid up 1.2 NLG Insurance Company Limited - 5,400 - 43,710 Level 1 54 Ordinary bonus shares of Rs 100 each fully paid up 1.3 Ridi Hydro Power Limited 3,600 4,410 3,600 5,781 Level 1 36 Ordinary shares @ Rs. 100 each fully paid up and bonus Shares - 13 Units 1.4 Butwal Power Company Ltd. 209,006,679 187,688,873 209,006,679 190,650,803 Level 1 417,179 ordinary shares @ Rs.100 each fully paid up and bonus shares - 41,718 Units 1.5 Rural Microﬁ nance Development Center - 458,073 - 411,390 Level 1 Limited 693 Units bonus Shares @ Rs 100 each fully paid up 1.6 Laxmi Laghubitta Sanstha Limited - 2,644 - 4,392 Level 1 4 Units ordinary bonus Shares @ Rs 100 each fully paid up 1.7 Mero Micro Finance Bittiya Sanstha Ltd. 37,023,000 46,046,000 14,000,000 20,020,000 Level 1 140,000 Promoter shares of Rs 100 each fully paid up, bonus Shares - 90,230 Units, Right Share - 230,230 (Total Shares - 460,460 Units) 1.8 Nepal Telecom Ltd. 34,698,472 34,382,502 - - Level 1 49,614 ordinary shares @ Rs.100 each fully paid up Sub-Total 280,943,051 268,833,902 223,221,579 211,394,676 -

128 www.nmbbanknepal.com 2. Investment in quoted mutual fund: 2.1 NMB Sulav Investment Fund-1 105,000,000 113,610,000 105,000,000 121,275,000 Level 1 10,500,000 Ordinary shares of Rs 10 each fully paid up 2.2 NMB Hybrid Fund-1 140,000,000 140,420,000 140,000,000 135,660,000 Level 1 14,000,000 Ordinary Share of Rs. 10 each fully paid up 2.3 Laxmi Equity Fund (LEMF) 40,947,100 31,242,637 40,947,100 33,167,151 Level 1 4,094,710 ordinary shares @ Rs 10 each fully paid up 2.4 NIC Asia Growth Fund (NICGF) 10,000,000 10,280,000 10,000,000 9,190,000 Level 1 1,000,000 units ordinary shares @ Rs. 10 each fully paid up 2.5 Sanima Equity Fund (SAEF) 20,000,000 18,800,000 20,000,000 19,120,000 Level 1 2,000,000 units ordinary shares @ Rs. 10 each fully paid up 2.6 Citizen Mutual Fund-I 10,000,000 10,180,000 10,000,000 9,280,000 Level 1 1,000,000 units ordinary shares @ Rs. 10 each fully paid up Sub-Total 325,947,100 324,532,637 325,947,100 327,692,151 Total Investments in quoted equity 606,890,151 593,366,539 549,168,679 539,086,827 instruments 3. Investment in unquoted equity 3.1 Nepal Stock Exchange Limited 5,000 71,600 5,000 5,000 Level 3 716 Ordinary shares of Rs 100 each fully paid up 3.2 Nepal clearing House Limited 4,198,000 6,045,100 4,198,000 4,198,000 Level 3 41,980 Equity shares of Rs 100 each and bonus Units - 18,741 (Total Units-60,451) 3.3 Credit Information Bureau Limited 189,000 1,890,000 189,000 189,000 Level 3 5,600 Ordinary shares of Rs 100 each, bonus Units - 3,710 (Total Units-9,310) 3.4 CEDB Hydro Fund Limited 10,000,000 11,989,200 10,000,000 10,000,000 Level 3 100,000 Promoter shares of Rs 100 each fully paid up, bonus Shares - 8,993 Units (Total Units-108,993) 3.5 Citizens Mutual Fund-II 2,000,000 2,000,000 - - Level 3 200,000 units of Rs 10 each fully paid up - - 3.6 NABIL BALANCE FUND-II Level 3 1,000,000 units of Rs 10 each fully paid up 10,000,000 10,000,000 Sub-Total 26,392,000 31,995,900 14,392,000 14,392,000 Grand Total 633,282,151 625,362,439 563,560,679 553,478,827

NMB Annual Report-2018/19 129 28. Capital Adequacy

The capital adequacy status as of 16 July 2019 is given below:

Amount in thousands 1.1 Risk Weighted Exposures 2076 Ashad End 2075 Ashad End a Risk Weighted Exposure for Credit Risk 112,632,092 95,709,597 b Risk Weighted Exposure for Operational Risk 5,117,630 4,159,720 c Risk Weighted Exposure for Market Risk 2,144,860 1,994,290 Total Risk Weighted Exposures (a+b+c) 119,894,582 101,863,607 Adjustments under Pillar II Add : RWE equvalent to reciprocal of capital charge of 3 % of gross income. 1,238,947 1,026,683 Add : 2% of the the total RWE due to Supervisory add up 2,397,892 2,037,272 Add: 2% of total RWE, Desired level of disclosure requirement has not been - 2,037,272 achieved. Total Risk Weighted Exposures (A er Bank’s adjustments of Pillar II) 123,531,421 106,964,834 1.2 Capital Tier 1 Capital (Core Capital) (CET1 +AT1) 16,166,512 15,810,510 a Paid up Equity Share Capital 9,618,163 7,603,291 b Irredeemable Non-cumulative preference shares - - c Share Premium 2,512,799 2,920,873 d Proposed Bonus Equity Shares - 1,140,494 e Statutory General Reserves 2,123,307 1,671,851 f Retained Earnings 1,780,327 2,339,182 g Un-audited current year cumulative proﬁ t/(Loss) - - h Capital Redemption Reserve - - i Capital Adjustment Reserve 57,326 57,326 j Dividend Equalization Reserves - - k Less: Deferred Tax Assets l Other Free Reserve - - m Debenture Redemption Reserve 400,000 309,547 n Less: Goodwill - - o Less: Intangible Assets (115,409) (22,054) p Less: Fictitious Assets - - q Less: Investment in equity in licensed Financial Institutions - - r Less: Investment in equity of institutions with ﬁ nancial interests (210,000) (210,000) s Less: Investment in equity of institutions in excess of limits - - t Less: Investments arising out of underwriting commitments - - u Less: Reciprocal crossholdings - - v Less: Purchase of land & building in excess of limit and unutilized - - w Less: Other Deductions - - Adjustments under Pillar II - - Less : Shortfall in Provision (6.4 a 1) - - Less : Loans and Facilities extended to Related Parties and Restricted - - lending (6.4 a 2) - - Supplementary Capital (Tier II) 2,894,863 1,040,744 a Cumulative and/or Redeemable Preference Share - - b Subordinated Term Debt 1,784,505 200,000 c Hybrid Capital Instruments - - d General loan loss provision 1,011,982 774,370 e Exchange Equalization Reserve 78,377 56,374 f Investment Adjustment Reserve 10,000 10,000 g Assets Revaluation Reserve - - h Other Reserves 10,000 - Total Capital Fund (Tier I and Tier II) 19,061,375 16,851,254 1.3 Capital Adequacy Ratios Common Equity Tier 1 Capital to Total Risk Weighted Exposures (Aﬅ er Bank’s 13.09 14.78 adjustments of Pillar II) Tier 1 Capital to Total Risk Weighted Exposures 13.09 14.78 Tier 1 and Tier 2 Capital to Total Risk Weighted Exposures 15.43 15.75

130 www.nmbbanknepal.com ------91,175 282,815 204,784 Risk Weighted Weighted Exposures ------Previous FY Previous Amount in thousands 182,350 910,588 1,414,075 1,023,920 5,136,354 2,409,718 10,334,628 Net Value Net Value ------2,747 590,453 467,021 680,793 Risk 1,417,546 (f=d*e) Weighted Weighted Exposures 0% 0% 0% 0% 0% 0% 0% 0% 0% 50% 20% 20% 50% 20% 50% 20% (e) 100% 100% 150% 100% 100% 150% 100% Risk Weight ------2,747 1,417,546 1,180,905 2,335,104 3,403,965 3,662,502 9,286,601 8,252,536 2,452,132 (d=a-b-c) Net Value Net Value ------(c) CRM 2076 Ashad End Eligible ------(b) Speciﬁ c Speciﬁ Provision Provision ------2,747 (a) 1,417,546 1,180,905 2,335,104 3,403,965 3,662,502 9,286,601 8,252,536 2,452,132 Book Value Book Value Assets Claims on foreign bank (ECA Rating 3-6) Claims on foreign Claims on foreign bank (ECA Rating 2) Claims on foreign Claims on foreign bank (ECA Rating 0-1) Claims on foreign Claims on domestic banks that do not meet capital adequacy requirements Claims on domestic banks that meet capital adequacy requirements Claims on Public Sector Entity (ECA 7) Claims on Public Sector Entity (ECA 3-6) Claims on Public Sector Entity (ECA 2) Claims on Public Sector Entity (ECA 0-1) Claims on Other Multilateral Development Banks Development Claims on Other Multilateral Claims On BIS, IMF, ECB, EC and MDB’s recognized by the framework recognized ECB, EC and MDB’s Claims On BIS, IMF, Claims on Foreign Government and Central Bank (ECA -7) and Central Government Claims on Foreign Claims on Foreign Government and Central Bank (ECA-4-6) and Central Government Claims on Foreign Claims on Foreign Government and Central Bank (ECA -3) and Central Government Claims on Foreign Claims on Foreign Government and Central Bank (ECA -2) and Central Government Claims on Foreign Claims on Foreign Government and Central Bank (ECA 0-1) and Central Government Claims on Foreign All claims on Nepal Rastra Bank All claims on Nepal Rastra Investment in Nepal Rastra Bank securities in Nepal Rastra Investment All Claims on Government of Nepal All Claims on Government Investment in Nepalese Government Securities in Nepalese Government Investment Gold Balance With Nepal Rastra Bank Nepal Rastra Balance With Balance Sheet Exposures Cash Balance Credit Risk Exposures Credit 2076 Ashad

NMB Annual Report-2018/19 131 ------0 6,581 49,058 86,026 792,349 462,625 564,835 815,224 350,053 183,123 6,255,404 4,703,799 5,484,542 5,327,240 54,199,076 79,066,359 ------0 4,387 49,058 86,026 103,824 771,042 564,835 543,483 350,053 915,614 3,961,747 6,593,723 6,255,404 3,135,866 9,140,904 7,102,986 54,199,076 104,634,189 ------6,588 83,096 28,741 686,691 265,354 651,603 294,605 784,212 376,363 3,335,525 6,402,895 6,233,714 7,059,846 65,675,730 94,356,831

0% 0% 0% 50% 20% 20% 10% 20% 60% 60% 75% 50% 20% 20% 100% 100% 100% 150% 100% 150% 150% 100% 100% 150% 100% 150% 100% 100% 150% ------4,392 92,645 83,096 442,257 651,603 294,605 522,808 376,363 143,707 3,433,456 5,205,236 3,335,525 4,268,597 9,413,128 10,389,524 65,675,730 127,688,016 ------402,659 386,955 386,955 ------7,920 35,762 357,389 401,070 ------4,392 92,645 442,257 659,522 294,605 880,197 376,363 118,858 143,707 3,836,115 5,205,236 3,335,525 4,655,551 9,413,128 10,389,524 65,675,730 128,476,040 Foreign counterparty (ECA Rating 3-6) Foreign Foreign counterparty (ECA Rating 2) Foreign Foreign counterparty (ECA Rating 0-1) Foreign LC Commitments With Original Maturity Upto 6 months domestic Commitments With LC counterparty Forward Exchange Contract Liabilities Exchange Contract Forward Bills Under Collection Off Balance Sheet Exposures Off Revocable Commitments TOTAL Other Assets (as per attachment) Cash in transit and other cash items in the process of collection and other cash items in the process Cash in transit Interest Receivable/claim on government securities Receivable/claim on government Interest Staff loan secured by residential property by residential loan secured Staff Investments in equity and other capital instruments of institutions not Investments listed in the stock exchange Investments in equity and other capital instruments of institutions Investments listed in stock exchange Lending against securities (bonds & shares) High Risk claims Past due claims (except for claims secured by residential properties) by residential Past due claims (except for secured Claims secured by Commercial real estate real by Commercial Claims secured Claims secured by residential properties (Overdue) properties by residential Claims secured Claims not fully secured by residential properties by residential Claims not fully secured Claims secured by residential properties by residential Claims secured Claims fulfi lling all criterion of regularity retail except granularity retail lling all criterion of regularity Claims fulfi Regulatory Retail Portfolio (Not Overdue) Claims on Foreign Corporates (ECA 7) Corporates Claims on Foreign Claims on Foreign Corporates (ECA 3-6) Corporates Claims on Foreign Claims on Foreign Corporates (ECA 2) Corporates Claims on Foreign Claims on Foreign Corporates (ECA 0-1) Corporates Claims on Foreign Claims on Domestic Corporates Claims on Domestic Corporates Claims on foreign bank incorporated in SAARC region operating with operating in SAARC region bank incorporated Claims on foreign capital requirement regulatory their respective er of 1% above a buff Claims on foreign bank (ECA Rating 7) Claims on foreign

132 www.nmbbanknepal.com ------1,318 72,558 146,100 246,375 2,146,394 1,728,771 2,100,462 1,649,740 2,024,174 5,734,996 95,709,597 16,643,238 ------1,318 146,100 362,792 1,231,875 1,728,771 2,100,462 3,299,480 4,048,349 10,731,972 11,469,992 45,676,581 150,310,770 ------1,263 62,370 175,096 282,287 3,845,744 1,171,618 1,909,100 2,113,342 2,395,189 5,632,561 18,275,261 112,632,092

20% 50% 20% 50% 50% 20% 50% 50% 20% 50% 200% 100% 100% 100% 100% 100% 100% 100% 150% 100% 150% 100% 150% ------1,263 175,096 311,850 1,411,434 1,171,618 1,909,100 4,226,684 4,790,378 19,228,721 11,265,121 53,129,958 180,817,973 ------404 338 242,931 295,664 4,226,684 1,247,400 4,002,305 10,805,341 10,418,386 ------401,070 ------1,600 175,096 1,411,434 1,172,022 2,152,031 8,453,369 1,559,251 5,086,043 19,228,721 15,267,426 63,548,344 192,024,385 Adjustments under Pillar II Add : 10% of the loan and facilities in excess Single Obligor Limits 6.4 a 3) with (sale) value in case of the sale credit Add : 1% of the contract (6.4 a 4) recourse adjustments of Pillar II) er Bank’s Risk ( A RWE for Credit Total Total RWE for credit Risk RWE for credit Total TOTAL Unpaid Guarantee Claims Unpaid Guarantee Other Contingent Liabilities “Claims on foreign bank incorporated in SAARC region operating with operating in SAARC region bank incorporated “Claims on foreign er of 1% above a buﬀ capital requirement” regulatory their respective Irrevocable Credit commitments (long term) Credit Irrevocable Irrevocable Credit commitments (short term) Credit Irrevocable Unpaid portion of Partly paid shares and Securities Unpaid portion of Partly paid shares Acceptances and Endorsements Financial Guarantee Financial Advance Payment Guarantee Advance Payment Guarantee Repurchase Agreements, Assets sale with recourse Assets sale with recourse Agreements, Repurchase Lending of Bank’s Securities or Posting of Securities as collateral Securities or Posting of as collateral Lending of Bank’s Underwriting commitments Foreign counterparty (ECA Rating 7) Foreign Foreign counterparty (ECA Rating 3-6) Foreign Foreign counterparty (ECA Rating 2) Foreign Foreign counterparty (ECA Rating 0-1) Foreign Bid Bond, Performance Bond and Counter guarantee domestic Bid Bond, Performance Bond and Counter guarantee counterparty Foreign counterparty (ECA Rating 7) Foreign Foreign counterparty (ECA Rating 3-6) Foreign Foreign counterparty (ECA Rating 2) Foreign Foreign counterparty (ECA Rating 0-1) Foreign LC Commitments With Original Maturity Over 6 months domestic Original Maturity Over Commitments With LC counterparty Foreign counterparty (ECA Rating 7) Foreign

NMB Annual Report-2018/19 133 ------Total Total ------Amount in thousands (i) Banks Sec/G'tee of Foreign of Foreign ------(h) MDBs G'tee of ------(g) banks G'tee of domestic ------(f) of Other Sec/G'tee Sovereigns Sovereigns ------(e) Nepal Nepal Govt. of Govt. G'tee of ------(d) NRB Govt.& Govt.& Securities ------(c) Gold Gold ------(b) Deposits Banks/FI with other ------(a) Deposits with Bank Balance Sheet Exposures Cash Balance Balance With Nepal Rastra Bank Nepal Rastra Balance With Credit exposures exposures Credit Gold Investment in Nepalese Government Securities in Nepalese Government Investment All Claims on Government of Nepal All Claims on Government Investment in Nepal Rastra Bank securities in Nepal Rastra Investment All claims on Nepal Rastra Bank All claims on Nepal Rastra Claims on Foreign government and Central Bank (ECA -1) and Central government Claims on Foreign Claims on Foreign government and Central Bank (ECA -2) and Central government Claims on Foreign Claims on Foreign government and Central Bank (ECA -3) and Central government Claims on Foreign Claims on Foreign government and Central Bank (ECA-4-6) Bank (ECA-4-6) and Central government Claims on Foreign Claims on Foreign government and Central Bank (ECA -7) and Central government Claims on Foreign Claims on BIS, IMF, ECB, EC And Multilateral Development Development ECB, EC And Multilateral Claims on BIS, IMF, Banks Claims on Other Multilateral Development Banks Development Claims on Other Multilateral Claims on Public Sector Entity (ECA 0-1) Claims on Public Sector Entity (ECA 2) Claims on Public Sector Entity (ECA 3-6) Claims on Public Sector Entity (ECA 7) Claims on domestic banks that meet capital adequacy requirements Claims on domestic banks that do not meet capital adequacy requirements Claims on foreign bank (ECA Rating 0-1) Claims on foreign 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Eligible Credit Risk Mitigants Eligible Credit 2076 Ashad

134 www.nmbbanknepal.com ------386,955 402,659 386,955 ------

------219,121 ------

------

4,489 4,489 ------

------

------382,466 183,538 382,466 Claims on foreign bank (ECA Rating 2) Claims on foreign Claims on foreign bank (ECA Rating 3-6) Claims on foreign Claims on foreign bank (ECA Rating 7) Claims on foreign Claims on foreign bank incorporated in SAARC region in SAARC region bank incorporated Claims on foreign their respective er of 1% above with a buff operating capital requirement regulatory Claims on Domestic Corporates Claims on Domestic Corporates Claims on Foreign Corporates (ECA 0-1) Corporates Claims on Foreign Claims on Foreign Corporates (ECA 2) Corporates Claims on Foreign Claims on Foreign Corporates (ECA 3-6) Corporates Claims on Foreign Claims on Foreign Corporates (ECA 7) Corporates Claims on Foreign Regulatory Retail Portfolio (Not Overdue) Regulatory Retail Portfolio (Not Overdue) Claims fulfi lling all criterion of regulatory retail except retail lling all criterion of regulatory Claims fulfi granularity Claims secured by residential properties properties by residential Claims secured Claims not fully secured by residential properties properties by residential Claims not fully secured Claims secured by residential properties (Overdue) (Overdue) properties by residential Claims secured Claims secured by Commercial real estate real by Commercial Claims secured Past due claims (except for claim secured by residential by residential Past due claims (except for claim secured properties) High Risk claims Investments in equity and other capital instruments of Investments institutions listed in the stock exchange Investments in equity and other capital instruments of Investments institutions not listed in the stock exchange Foreign counterparty (ECA Rating 2) Foreign Foreign counterparty (ECA Rating 0-1) Foreign LC Commitments With Original Maturity Upto 6 months Commitments With LC domestic counterparty Total Balance Sheet Exposures Off Liabilities Exchange Contract Forward Other Assets (as per attachment) 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41

NMB Annual Report-2018/19 135 ------338 404 295,664 242,931 1,247,400 4,226,684 4,002,305 10,805,341 10,418,386 ------

1,247,400 4,226,684 5,474,085 5,474,085 ------3,183,884 3,403,006 3,403,006 ------

------

4,489 ------

------

338 404 295,664 818,421 242,931 1,923,762 1,541,296 Total Credit Risk Exposure Credit Total Total Other Contingent Liabilities Claims on foreign bank incorporated in SAARC region in SAARC region bank incorporated Claims on foreign their respective er of 1% above with a buﬀ operating capital requirement regulatory Irrevocable Credit commitments(Long Term) Credit Irrevocable Irrevocable Credit commitments(Short Term) Credit Irrevocable Financial Guarantee Guarantee Financial Acceptances and Endorsements and Securities Unpaid portion of Partly paid shares Advance Payment Guarantee Advance Payment Guarantee Repurchase Agreements, Assets sale with recourse Assets sale with recourse Agreements, Repurchase Lending of Bank's Securities or Posting as collateral Underwriting commitments Foreign counterparty (ECA Rating 7) Foreign Foreign counterparty (ECA Rating 2) Foreign counterparty (ECA Rating 3-6) Foreign Foreign counterparty (ECA Rating 0-1) Foreign Bid Bond, Performance Bond and Counter guarantee Bid Bond, Performance Bond and Counter guarantee domestic counterparty Foreign counterparty (ECA Rating 7) Foreign Foreign counterparty (ECA Rating 3-6) Foreign Foreign counterparty (ECA Rating 2) Foreign Foreign counterparty (ECA Rating 0-1) Foreign LC Commitments With Original Maturity Over 6 months Original Maturity Over Commitments With LC domestic counterparty Foreign counterparty (ECA Rating 7) Foreign Foreign counterparty (ECA Rating 3-6) Foreign

136 www.nmbbanknepal.com Market Risk Exposures 2076 Ashad

Amount in thousands

2076 Ashad End 2075 Ashad End S.No. Currency Relevant Open Relevant Open Open Position (FCY) Open Position (NPR) Position Position 1 INR (2,647,689) (4,238,289) 4,238,289 3,913,111

2 USD 85.2 9,363 9,363 23,693

3 GBP (12.5) (1,708) 1,708 1,744

4 CHF (4.2) (470) 470 47

5 EUR (49.3) (6,082) 6,082 1,422

6 JPY (426.7) (434) 434 13,827

7 SEK (1.0) (12) 12 0

8 DKK (10.0) (165) 165 155

9 HKD (11.2) (157) 157 112

10 AUD (62.6) (4,859) 4,859 1,166

11 SGD (72.9) (5,902) 5,902 1,379

12 KRW (322.9) (30) 30 17,630

13 AED (56.0) (1,675) 1,675 291

14 MYR (118.4) (3,168) 3,168 2,947

15 THB (27.0) (96) 96 191

16 QAR (107.4) (3,257) 3,257 2,126

17 CNY (161.0) (2,571) 2,571 3,235

18 CAD (69.3) (5,833) 5,833 368

19 SAR (186.6) (5,466) 5,466 5,056

20 KWD (0.4) (160) 160 81

21 BHD (0.0) (14) 14 2

Total Open Position (a) 4,289,712 3,988,583

Fixed Percentage (b) 5% 5%

Capital Charge for Market Risk [c=(a×b)] 214,486 199,429

Risk Weight (reciprocal of capital requirement of 10%) in times (d) 10 10

Equivalent Risk Weight Exposure [e=(c×d)] 2,144,860 1,994,290

NMB Annual Report-2018/19 137 Operation Risk Exposures 2076 Ashad

Amount in thousands

Years before 2076 Ashar End Particulars 2072/73 2073/74 2074/75 Net Interest Income 2,013,282 2,603,980 2,904,014

Commission and Discount Income 197,616 635,069 794,250

Other Operating Income 218,106 121,978 164,962

Exchange Fluctuation Income 160,269 154,790 299,606

Addition/Deduction in Interest Suspense during the period 3,412 (3,072) (33,010)

Gross income (a) 2,592,684 3,512,744 4,129,822

Alfa (b) 15% 15% 15%

Fixed Percentage of Gross Income [c=(a×b)] 388,903 526,912 619,473

Capital Requirement for operational risk (d) (average of c) 511,763

Risk Weight (reciprocal of capital requirement of 10%) in times (e) 10

Equivalent Risk Weight Exposure [f=(d×e)] 5,117,630

Adjustments under Pillar II

If Gross Income for all the last three years is negative (6.4 a 8)

Total Credit and Investments (net of speciﬁ c Provision)

Capital Requirement for Operational Risk (5%)

Risk Weight (reciprocal of capital requirement of 10% ) in times 10

Equivalent Risk Weight Exposure (g)

Equivalent Risk Weight Exposure (h= f + g)

138 www.nmbbanknepal.com 29. Operating Segments a) General Information: The bank has identifi ed its segments on the basis of geographical location as per provinces of the country. The bank supervises, manages and controls its branch networks through regional demarcations. All the transactions have been done at the arm’s length prices between the segments with intra segment revenue and cost being eliminated at the Head Offi ce. Interest earnings and foreign exchange gains/losses generated while conducting businesses under diff erent segments are reported under the respective segment. Equity and Tax Expense are not allocated to the individual segments. For segmentation purpose, all business transactions of offi ces and business units located in a particular province are grouped together. b) Description of the types of products and services from which each reportable segment derives its revenues

The products and services oﬀ ered by the Bank can be broadly divided into the following categories:

1. Retail Banking: Retail banking, also known as consumer banking, is the provision of services by a bank to the general public, rather than to companies, corporations or other banks. Banking services which are regarded as retail include provision of savings and transactional accounts, mortgages, personal loans, debit cards, and credit cards.

2. Corporate, SME and Institutional (except Retail): The corporate and institutional banking segment of banks typically serves a diverse range of clients, ranging from small- to mid-sized local businesses with a few millions in revenues to large conglomerates with billions in sales and oﬃ ces across the country.

3. Treasury Unit – The unit has two divisions – Front and back treasury operations. It operates within the consideration of the foreign exchange rules and regulations under the guidance of Nepal Rastra Bank (NRB) – central bank of Nepal. The major functions are exchange rate updation, check foreign currency position, fund management, deal T-bills/ bond, interbank placements, forward contract and other treasury research.

4. Trade Finance - The Bank’s trade ﬁ nance operations like LC, Guarantee etc are handled by trade ﬁ nance.

5. Others

NMB Annual Report-2018/19 139 - - Total Total 166,272,634 176,793,355 3,248,003,834 4,244,020,946 9,341,473,255 98,516,666,963 93,318,014,920 13,585,494,201 12,553,562,807 12,553,562,807 135,470,409,573 135,470,409,573 - - - - - 16,763,620 15,987,113 Others 392,910,174 (225,153,374) (392,910,174) (376,923,061) (392,910,174) 18,528,203,737 12,845,360,968 - - - - 38,246,646 657,627,518 626,263,279 305,450,887 931,714,166 235,687,428 Treasury 6,963,613,401 1,407,344,173 1,171,656,745 29,307,033,685 - 6,017,224 10,389,307 Deprived 487,635,325 436,814,164 118,678,584 209,217,416 272,655,961 481,873,376 230,389,699 488,916,745 (258,527,047) 4,610,783,213 4,610,783,213 - 5,021,095 55,354,015 Corporate (143,768,843) 1,247,385,933 1,664,592,587 3,080,536,507 4,745,129,094 5,035,248,731 5,179,017,573 50,980,263,760 42,415,796,971 45,667,120,804 42,415,796,971 - 86,065,007 38,648,131 939,713,325 1,604,983,544 1,437,712,793 1,470,124,077 1,716,632,371 3,186,756,447 1,721,525,412 3,429,754,519 29,614,677,002 29,614,677,002 (1,708,229,106) SME & MSME - Retail 64,797,224 21,763,719 509,751,847 666,733,763 3,573,287,354 4,240,021,117 4,535,977,853 2,267,747,741 2,268,230,112 56,905,709,806 16,676,757,733 50,975,019,203 16,676,757,733 Particulars Segment liabilities Segment assets Impairment of assets -Deposits Entity’s interest in the profi t or loss of associates accounted for using equity method - Not Applicable in the profi interest Entity’s Other material items -Loan and advances Segment profi t/(loss) Segment profi Depreciation and Depreciation amortization Net Interest Revenue (b) Revenue Net Interest Interest Expense Interest Interest Revenue Interest Net Revenue Intersegment revenues Revenues from external from Revenues customers m l k i j h g f e d c b a c) Information about profi t or loss, assets and liabilities c) Information about profi

140 www.nmbbanknepal.com d) Measurement of operating segment proﬁ t or loss, assets and liabilities

a. Basis of accounting for any transactions between reportable segments:

The Bank is organised for management and reporting purposes into segments such as: Retail, SME and MSME, Corporate, Deprived, Treasury and Others. The Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Income tax is managed on a group basis and are not allocated to operating segments. All transactions between segments are conducted on an arm’s length basis, with inter-segment revenue and costs being eliminated in “Others”. Support costs are also allocated to Retail, Corporate, SME and MSME, Deprived, Treasury and others based on Management’s estimates of the beneﬁ ts accruing to these segments for the costs incurred.

ii. Nature of any diff erences between the measurements of the reportable segment’s profi ts or losses and the entity’s profi t or loss before income tax None ii. Nature of any diff erences between the measurements of the reportable segment’s assets and the entity’s assets. None iii. Nature of any changes from prior periods in the measurement methods used to determine reported segment profi t or loss and the eff ect, if any, The bank has segmental division based upon the business segment and geographical segment also. IV. Nature and eff ect of any asymmetrical allocations to reportable segments None e) Reconciliations of reportable segment revenues, profi t or loss, assets and liabilities

a Revenue Particulars Amount Total Revenues for reportable segments 15,057,493,205 Other Revenues - Elimination of intersegment revenues 2,503,930,399 Entity’s Revenues 12,553,562,807

b Profi t or Loss Particulars Amount Total profi t or loss for reportable segments 3,248,003,834 Other profi t or loss - Elimination of intersegment profi ts - Unallocated amounts - Profi t before income tax 3,248,003,834

NMB Annual Report-2018/19 141 c Assets Particulars Amount Total assets for reportable segments 135,470,409,573 Other assets - Unallocated amounts - Entity’s assets 135,470,409,573

d Liabilities Particulars Amount Total liabilities for reportable segments 135,470,409,573 Other liabilities - Unallocated amounts - Entity’s liabilities 135,470,409,573

f) Information about products and services

Particulars Amount (Fees Income) Retail Banking 295,956,736

Corporate, SME & Institutional 659,232,784

Treasury 475,630,007

Trade Finance 17,653,766

Others 16,482,342

Total 1,464,955,635

g) Information about geographical areas

Particulars Revenue (Amount )

a Domestic 12,553,562,807 - Province 1 1,619,728,598

- Province 2 804,921,236

- Province 3 8,213,080,874

- Gandaki Province 252,978,830

- Province 5 1,317,855,766

- Karnali Province 69,152,848

- Far Western Province 275,844,655

b Foreign -

Total (a+b) 12,553,562,807

142 www.nmbbanknepal.com h) Information about major customers

Information about the extent of its reliance on its major customers, if revenue from a single external customer amounts to 10 percent or more of the entity’s revenue.

Not Applicable

30. Share options and share based payment

The Group does not have any share options or share-based payment transactions in the reporting period or in earlier period.

31. Merger and Acquisition

The Group has not entered into any merger and acquisition activities in the reporting period and in the comparative previous period. However, the Bank had signed Memorandum of Understanding dated 16 May 2019 with Om Development Bank Limited (ODBL) to merge ODBL with NMB Bank. Aﬅ er obtaining necessary regulatory approvals, both the Banks commenced joint operations from 28 September 2019 (11 Ashwin 2076) as NMB Bank Limited.

Erstwhile ODBL was a Pokhara based National Level Development Bank Limited with Paid -up Capital of NPR 2.51 Bio and Reserve and Surplus of NPR 1.4 Bio. as on Mid July 2019. ODBL had a Branch network of 53 and 19 ATMs with total Deposit mobilization of 25 Billion and Loan and Advances totalling 22 Billion. The merger was driven by NMB Bank’s strategic intent to have a strong presence in Province 4 where a majority of erstwhile ODBL’s branches are located. The shareholders of ODBL were provided with a swap ratio of 1:0.76.

32. Additional disclosures of non-consolidated entities

The Group does not have any non-consolidated entities to report for the reporting period and in the comparative previous period.

33. Events aﬅ er the Balance Sheet Date

No circumstances have arisen since the Balance Sheet date which would require adjustments to or disclosure in the Financial Statements other than those disclosed in the notes.

NMB Annual Report-2018/19 143 34. Related Party Disclosures

(a) Board Member Allowances and Facilities The Board of Directors has been paid meeting fees of NPR 1,659,000 during the ﬁ scal year. There were 27 Board Meeting conducted during the interim period.

The Chairperson and other members of the Board are paid NPR 13,000 and NPR 12,000 per meeting respectively for Board and Board Level Committees.

The Meeting fees paid to diﬀ erent Board Level Committees are as follows:

Board Level Committees No of Meetings Meeting Allowance (NPR) Audit Committee 17 396,000

Risk Management Committee 19 444,000

Human Resource Service Committee 6 132,000

Building Construction Sub-Committee 7 180,000

Assets Laundering Prevention Committee 4 72,000

Merger Committee 9 324,000

As approved by the 18th Annual General Meeting held on 4 Poush 2070, the Board Members have been provided with a monthly allowance of NPR 8,000 for telephone, newspaper and mobile expenses till Falgun End 2075. From Chaitra 2075 monthly allowance of NPR 12,000 is paid as per 23rd Annual General Meeting held on Poush 26 2075. The total amount paid as monthly allowances to the board members during the reporting period amounted to NPR 624,000.

Existing members of the Board are:

i) Mr. Pawan Kumar Golyan Chairman (Represents Group – Promoter Shareholder)

ii) Mr. Nico Klass Geradus Pijl Member (Representative from FMO)

iii) Ms. Rajendra Kaﬂ e Member (Representative from Employees Provident Fund)

iv) Mr. Harishchandra Subedi Member (Represents Group – Public Shareholder)

v) Mr. Pradeep Raj Pandey Independent Director

vi) Mr. Nand Kishor Rathi Alternate Director to Mr. Nico Pijl

(b) Loans and Advances extended to Promoters

There are no such loans extended to promoters.

144 www.nmbbanknepal.com (c) Compensation Details for Key Management Personnel

Key Management Personnel includes members of Executive Committee of the Bank.

S.No Particulars Amount A Short Term Employee Beneﬁ ts 63,851,298

B Post-Employment Beneﬁ ts Nil

C Other Long Term Beneﬁ ts Nil

D Termination Beneﬁ ts (Gratuity and Sick Leave Encashment) Nil

E Share Based Payment Nil

Total of Key Management Personnel Compensation 63,851,298

The Salary and beneﬁ ts paid to CEO is as follow:

Provident Bonus & Other Particulars Basic Salary Allowance Total Income Fund Welfare Perquisites C.E.O 5,904,000 590,400 5,248,000 4,737,609 208,860 16,688,869

Total 5,904,000 590,400 5,248,000 4,737,609 208,860 16,688,869

Key management personnel are also provided with the following benefi ts: i) Benefi ts as per the Employee Terms of Service By-laws, ii) Bonus to staff as per the Bonus Act, iii) Vehicle Fuel Expenses as per the Bank’s Staff Vehicle Scheme.

Existing members of Executive Committee include:

Mr. Sunil KC Chief Executive Offi cer Mr. Pradeep Pradhan Chief Operating Offi cer Ms. Shabnam Limbu Joshi Chief Human Resource Offi cer Mr. Sharad Tegi Tuladhar Chief Risk Offi cer Mr. Sudesh Upadhyaya Chief Business and Strategy Offi cer Mr. Govind Ghimire Chief Business Offi cer Mr. Navin Manandhar Chief Finance Offi cer Mr. Pramod Dahal Chief Internal Audit and AML/CFT Offi cer Mr. Roshan Regmi Head Product Digital Channel and Retail Sales

NMB Annual Report-2018/19 145 (d) Transaction with Subsidiaries

Amount in Thousand S No Particulars NMB Capital NMB Micro Finance 1 Investment by NMB Bank Ltd. 200,000 48,552 2 Deposits in NMB Bank Ltd. 140,104 4,255 3 Borrowing from NMB Bank Ltd. - 600,000 4 Interest Payment by NMB Bank Ltd. 2,138 - 5 Interest Payment to NMB Bank Ltd. - 65,077

6 Rent Payment to NMB Bank Ltd. 2,173 -

7 Management Fee Payment to NMB Bank 2,400 - 8 Share Registrar Fee payment by NMB Bank 762 9 Investment by NMB Bank Ltd. in NMB Sulav Investment 105,000 - Fund-1 as Seed Capital 10 Investment by NMB Bank Ltd in NMB Hybrid Fund-1 as 140,000 - Seed Capital 11 Dividend Distribution of NMB Sulav Investment Fund-1 to 22,105 - NMB Bank Ltd. 12 Dividend Distribution of NMB Capital Ltd. to NMB Bank 38,000 - Ltd. for FY 2074.75

The intra-group related ﬁ gures have been excluded for presentation of the ﬁ nancial statement of the Group.

146 www.nmbbanknepal.com Disclosure under New Capital Adequacy Framework for the Year Ended Ashad 2076

Amounts in NPR Thousands

1. Capital Management a. The bank assesses the impact of the new rules, if any on their capital adequacy through a comprehensive capital planning and optimisation/mitigation process. The capital planning is an integral part of the Bank’s medium term strategic planning and annual budget formulation process. Total risk weighted exposures for the projected level of business operations is calculated, the required capital level is projected, and a plan is formulated to maintain the required capital.

The bank has not raised any capital through hybrid capital instruments till 16 July 2019.

2. Capital Structure and Capital Adequacy:

2.1. Tier 1 Capital and a breakdown of its Components:

S.No. Details Amount 1. Paid up Equity Share Capital 9,618,163 2. Share Premium 2,512,799 3. Proposed Bonus Equity Shares - 4. Statutory General Reserves 2,123,307 5. Retained Earnings 1,780,327 6. Capital Adjustment Reserve 57,326 7. Deferred Tax Reserves - 8. Deferred Tax Assets - 9. Debenture Redemption Reserve 400,000 10. Less: Investment in equity of institutions with ﬁ nancial interest (210,000) 11. Less: Intangible Assets (115,409) Total Core Capital 16,166,512

2.2.Tier 2 Capital and a breakdown of its Components:

S.No Details Amount 1. Subordinated Term Debt 1,784,505 2. General Loan Loss Provision 1,011,982 3. Exchange Equalization Reserve 78,377 4. Investment Adjustment Reserve 10,000 5. Other Reserve 10,000 Total Supplementary Capital 2,894,863

NMB Annual Report-2018/19 147 2.3. Detailed information about the Subordinated Term Debts with information on the outstanding amount, maturity, and amount rose during the year and amount eligible to be reckoned as capital funds.

The Bank had issued “7% NMB Debenture 2077” on 6 Falgun 2071 amounting to NPR 500 Million having a maturity of 5 years 6 months. The Debenture was fully subscribed. As at the year end, the outstanding amount of Debenture is 500 Million whereas NPR 100 Million is only eligible to be recognized as capital funds (Tier 2). To reﬂ ect the diminishing value of these instruments as a continuing source of strength, a cumulative discount (amortization) factor of 20% per annum has been applied for capital adequacy computations, during the last 5 years to maturity.

During the fi scal year, the bank has also issued 3 million units of NMB Debenture 2085 with the face value of NPR. 1000 per unit amounting NPR 3 Billion at the rate of 10% for the period of 10 years. The General public had subscribed 99,505 units amounting NPR. 99,505,000 and 1,585,000 units amounting NPR. 1,585,000,000 was subscribed through Private Placements. The fi nal allotment of NPR. 1,684,505,000 to the subscribed unit holders was made on 29 Chaitra 2075. To refl ect the diminishing value of these instruments as a continuing source of strength, a cumulative discount (amortization) factor of 20% per annum will be applied for capital adequacy computations, during the last 5 years to maturity.

The amortized cost of debenture as on ﬁ scal year end is NPR. 2,239,236,412.

2.4. Deductions from Capital:

Investment in equity shares of fully owned subsidiary company NMB Capital Ltd amounting to NPR 200,000,000 and CEDB Hydro Fund amounting to NPR 10,000,000 has been deducted from Tier 1 Capital.

Similarly, the amount of deferred tax reserve has been separately credited to Regulatory reserve, which is not considered for the purpose of capital ratios.

Intangible asset has also been deducted as per NRB Directive by NPR 115,408,800.

2.5. Total Qualifying Capital:

S.No Details Amount 1. Core Capital (Tier 1) 16,166,512

2. Supplementary Capital (Tier 2) 2,894,863

Total Capital Fund 19,061,375

2.6. Capital Adequacy Ratio:

S.No Details Percentage 1. Tier 1 Capital to Total Risk Weighted Exposure 13.09%

2. Tier 1 and Tier 2 Capital to Total Risk Weighted Exposure 15.43%

148 www.nmbbanknepal.com 2.7. Summary of the terms, conditions and main features of all capital instruments, especially in case of subordinated term debts including hybrid capital instruments.

The capital instruments of the Bank include fully paid up Equity Shares and Debenture. Both are non-convertible. The main features of Debenture have been mentioned under S.No 2.3 above.

3. Risk Exposures:

3.1. Risk Weighted Exposures for Credit Risk, Market Risk and Operational Risk:

S.No Risk Weighted Exposure Amount a. Risk Weighted Exposure for Credit Risk 112,632,092 b. Risk Weighted Exposure for Operational Risk 5,117,630 c. Risk Weighted Exposure for Market Risk 2,144,860 Total Risk Weighted Exposures (a+b+c) 119,894,582 Add: RWE equivalent to reciprocal of capital charge of 3 % of gross income. 1,238,947 Add : 2% of the total RWE due to Supervisory add up 2,397,892 Add: 2% of total RWE, Desired level of disclosure requirement has not been - achieved. Total Risk Weighted Exposures (A er Bank’s adjustments of Pillar II) 123,531,421

3.2. Risk Weighted Exposures under each of categories of Credit Risk:

S.No Particulars Amount 1. Claims on government and Central Bank NIL 2. Claims on other Offi cial Entities NIL 3. Claims on Bank 3,187,301 4. Claims on Domestic Corporate and Securities Firms 65,675,730 5. Claims on Foreign Corporate Nil 6. Claims on Regulatory Retail Portfolio 7,059,846 7. Claims fulfi lling all criterion of regulatory retail except granularity Nil 8. Claims secured by Residential Properties 6,233,714 9. Claims not fully secured by residential properties Nil 10. Claims secured by Residential Properties (Overdue) 83,096 11. Claims secured by Commercial Real Estate 376,363 12. Past Due Claims 784,212 13. High Risk Claims 6,402,895 14. Lending against securities (bonds & shares) 294,605 15. Investments 923,545 16. Other Assets 3,335,525 17. Off Balance sheet items 18,275,261 Total 112,632,092

NMB Annual Report-2018/19 149 3.3. Total Risk Weighted Exposure calculation table:

S.No Particulars Amount a. Risk Weighted Exposure for Credit Risk 112,632,092

b. Risk Weighted Exposure for Operational Risk 5,117,630

c. Risk Weighted Exposure for Market Risk 2,144,860

1. Total Risk Weighted Exposure 119,894,582 Add: RWE equivalent to reciprocal of capital charge of 3 % of gross income. 1,238,947

Add : 2% of the total RWE due to Supervisory add up 2,397,892

Add: 2% of total RWE, Desired level of disclosure requirement has not been - achieved.

Total Risk Weighted Exposures (A er Bank’s adjustments of Pillar II) 123,531,421

2. Total Core Capital Fund (Tier 1) 16,166,512

3. Total Capital Fund ( Tier 1 & Tier 2) 19,061,375

4. Total Core Capital to Total Risk Weighted Exposures (%) 13.09%

5. Total Capital to Total Risk Weighted Exposures (%) 15.43%

3.4. Amount of Non-Performing Assets (NPAs)

S.No Category Gross Provision Net 1. Restructured/Rescheduled 96,884 22,043 74,841

2. Substandard 219,452 54,863 164,589

3. Doubtful 260,090 130,045 130,045

4. Loss 179,992 179,992 -

Total 756,418 386,943 369,475

3.5. NPA Ratio Gross NPA to Gross Advances: 0.82% Net NPA to Net Advances: 0.41%

3.6 Movement of Non-Performing Assets

S.No Particulars Ashad End 2075 Ashad End 2076 Movement 1. Restructure/Reschedule Loan 1,361 96,884 95,523 2. Substandard 172,303 219,452 47,149 3. Doubtful 255,984 260,090 4,106 4. Loss 239,663 179,992 (59,671) Total Non-Performing Loan 669,311 756,418 87,107

150 www.nmbbanknepal.com 3.7. Movement of Loan Loss Provision and Interest Suspense on loans & advances

S.No Category Ashad End 2075 Ashad End 2076 Movement 1. Pass 778,735 888,849 110,902 2. Watch List 42,998 123,132 79,346 3. Restructured 189 22,043 21,854 4. Substandard 43,076 54,863 11,787 5. Doubtful 127,992 130,045 2,053 6. Loss 239,663 179,992 (59,671) Total Loan Provision 1,232,653 1,398,925 166,272 Accrued Interest Receivable 222,679 697,364 474,684 (including staﬀ )

Aﬅ er change of Core Banking System, the interest on majority of risk assets portfolio are due as per English Calender due to which approximately a fortnight’s interest income are not realized as of ﬁ scal year end 2076.

As per NRB Interest Income Recognition Guideline, the interest amount of NPR. 32,210,184.75 has been reversed and credited to Interest Suspense during the reporting period.

3.8. Details of Additional Loan Loss Provision

S.No Category Ashad End 2076 1. Pass - 2. Watch List 10,851 3. Restructured - 4. Substandard - 5. Doubtful - 6. Loss - Total Additional Loan Loss Provision 10,851

3.9. Eligible Credit Risk Mitigants (CRM) availed

As per the provisions of the New Capital Adequacy Framework, the bank has claimed all the eligible credit risk Mitigants of NPR 10,805,341 thousands for Balance Sheet and Oﬀ Balance Sheet exposures and availed beneﬁ t thereof.

NMB Annual Report-2018/19 151 4. Compliance with external requirement

The bank is subject to compliance requirement under NRB Directive No.1/075 which has stipulated a minimum Total Capital Adequacy Ratio (CAR) of 11.00%. The Bank complied with this requirement at all times during the reporting period. The compliance position at the reporting date is given below:

Capital Parameter Requirement NMB Bank Minimum Common Equity Capital Ratio 4.50% 7.79% Capital Conversation Buff er 2.50% 2.50% Minimum common equity plus capital conservation buff er 7.00% 10.29% Minimum Tier 1 Capital (Excluding conservation buff er) 6.00% 10.59% Minimum Total Capital (Excluding conservation buff er) 9.00% 12.93% Minimum Total Capital (including conservation buff er) 11.00% 15.43% Leverage Ratio 4.00% 8.48%

5. Summary of the Bank’s internal approach to assess the adequacy of its capital to support current and future activities:

The bank follows Internal Capital Adequacy Assessment Process (ICAAP) and Risk Management Guideline while taking decision on any business. It has always taken note of ICAAP and has taken steps accordingly in ensuring soundness of capital position and sustainability of the business.

Risk management is essential for well-being of the overall banking business. Credit, Market and Operational Risk are managed independently at NMB Bank. Credit Risk Department reviews risk related to credit prior to disbursement of all loans, it is independent of a loan approver. Credit Risk Management Committee meets once a month to review credit portfolio risk. Market risk is closely monitored all time and managed through ALCO. Operational Risk Committee which meets once each month is a platform to assess/monitor operational risk identiﬁ ed vides various units, branches. Eﬀ ective implementation of process/controls is periodically reviewed by an Operational Risk Unit. Operational Risk Unit also carries out assurance reviews of the units to evaluate control weakness, recommends robust controls around the risk areas and monitors execution of control in an ongoing basis.

Audit Committee is formed as per the ‘Terms of Reference’ prescribed by NRB with 3 members. Coordinator of the committee is one of the Non-Executive Directors with Head Internal Audit as its secretary. The committee reviews internal/external/NRB audit reports, recommends stringent control process and escalates the audit observations to the Board. The Committee also reviews quarterly unaudited ﬁ nancial reports of the Bank with recommendation to the Board. The committee selects and recommends External Auditor to the Board based on ﬁ nancial and technical evaluations. Audit Committee is committed towards maintaining robust control system hence monitors closure of risk issues raised by Internal/External/NRB auditors.

Risk Management Committee with view of ensuring better risk management in the bank and in line of NRB’s requirement is formed with 5 members chaired by Non-Executive Director, Coordinator of Audit Committee, Head Operation, Head Credit Risk and Head Compliance, and Operational Risk are the members of the committee. The committee reviews high risk issues escalated by operational and credit risk committees (management level), deliberates on the risks and recommends to the Board if required. Stress testing/Capital adequacy is also reviewed at the committee with recommendation to the Board. Revised/new NRB directives, Monetary Policy with material impact on the Bank are also reviewed for its implications.

152 www.nmbbanknepal.com Now has become

Annual Financial Statements FY 2018-19 OM Development Bank Ltd.

NMB Annual Report-2018/19 153 154 www.nmbbanknepal.com NMB Annual Report-2018/19 155 156 www.nmbbanknepal.com Statement of Financial Position As on 31st Ashad 2076

(Amount in NPR)

Restated Restated Particulars Notes 31 Ashad 2076 32 Ashad 2075 1st Shrwan 2074

Assets Cash and cash equivalent 4.1 4,573,597,783 4,606,754,593 3,363,268,270 Due from Nepal Rastra Bank 4.2 1,148,397,928 1,122,470,190 800,622,192 Placement with Bank and Financial Institutions 4.3 - - - Derivative ﬁ nancial instruments 4.4 - - - Other trading assets 4.5 - - - Loan and Advances to B/FIs 4.6 568,088,484 122,826,450 33,726,450 Loans and advances to customers 4.7 22,360,606,116 18,180,600,184 13,948,256,529 Investment in securities 4.8 919,797,104 854,763,271 794,100,017 Current Tax Assets 4.9 26,903,428 - - Investment in subsidiaries 4.10 - - - Investment in Associates 4.11 - - - Investment property 4.12 - - - Property and equipment 4.13 184,187,635 211,158,529 156,186,157 Goodwill and Intangible Assets 4.14 4,384,560 6,213,148 5,083,341 Deferred tax assets 4.15 18,073,481 - - Other assets 4.16 56,547,931 47,551,242 42,607,951 Total Assets 29,860,584,450 25,152,337,606 19,143,850,907

NMB Annual Report-2018/19 157 Statement of Financial Position As on 31st Ashad 2076

(Amount in NPR)

Restated Restated Particulars Notes 31 Ashad 2076 32 Ashad 2075 1st Shrwan 2074

Liabilities Due to Bank and Financial Institutions 4.17 1,496,132,384 599,112,852 614,140,643 Due to Nepal Rastra Bank 4.18 - - - Derivative Financial instruments 4.19 - - - Deposit from customers 4.20 24,153,016,531 20,856,078,516 15,447,288,578 Borrowings 4.21 - - - Current Tax Liabilities 4.9 - 13,522,470 8,355,564 Provisions 4.22 - - - Deferred tax liabilities 4.15 - 5,375,460 39,780,834 Other liabilities 4.23 356,519,924 353,110,962 301,292,494 Debt securities issued 4.24 - - - Subordinated Liabilities 4.25 - - - Total liabilities 26,005,668,839 21,827,200,259 16,410,858,113 Equity Share Capital 4.26 2,515,235,600 2,515,235,600 1,878,696,987 Share Premium 28,614,713 28,614,713 15,372,574 Retained Earning 548,909,519 312,881,810 376,762,827 Reserves 4.27 762,155,780 468,405,224 462,160,406 Total equity attributable to equity holders 3,854,915,611 3,325,137,347 2,732,992,794 Non-controlling interests - - - Total equity 3,854,915,611 3,325,137,347 2,732,992,794 Total liabilities and equity 29,860,584,450 25,152,337,606 19,143,850,907 Contingent liabilities and commitment 4.28 411,043,846 550,698,431 530,602,213 Net assets value per share 153.26 132.20 145.47

As per our attached report of even date

Sunil KC Pawan Kumar Golyan Nico Pijl Rajendra Kaﬂ e Harischandra Subedi Rajesh Paudel, FCA CEO Chairman Director Director Director Partner P.L. Shrestha & Co. Chartered Accountants

Pradeep Raj Pandey Rabi Shankar Sainju Sunity Shrestha Hada Navin Manandhar Mridul Parajuli Director Director Director Chief Finance Oﬃ cer Head-Finance & Planning

Date: Tuesday, 26 November, 2019 Place: NMB Bhawan, Babarmahal, Kathmandu

158 www.nmbbanknepal.com Statement of Proﬁ t or Loss For the year ended 31 Ashad 2076

(Amount in NPR)

Restated Particulars Notes 2075-76 2074-75

Interest Income 4.29 3,313,657,484 2,436,258,999 Interest Expense 4.30 (2,087,924,029) (1,563,395,029) Net interest income 1,225,733,455 872,863,970 Fees and Commission Income 4.31 202,407,434 173,888,506 Fees and Commission Expense 4.32 8,214,487 2,777,672 Net fee and Commission income 194,192,947 171,110,835 Net interest fee and commission income 1,419,926,403 1,043,974,805 Net Trading Income 4.33 3,735,696 127,734 Other Operating Income 4.34 1,033,110 9,185,022 Total operating income 1,424,695,208 1,053,287,560 Impairment charge/(reversal) for loans and other losses 4.35 182,205,533 46,899,435 Net Operating income 1,242,489,675 1,006,388,125 Operating expenses Personal Expense 4.36 308,392,884 246,924,107 Other Operating Expenses 4.37 156,494,137 136,966,125 Depreciation and amortisation 4.38 57,436,698 45,289,324 Operating Profi t 720,165,956 577,208,569 Non operating income 4.39 19,993 12,400 Non operating expense 4.40 - - Profi t before income tax 720,185,949 577,220,969 Income tax expense 4.41 184,738,192 182,893,041 Current tax 205,466,362 178,440,863 Deferred tax income (20,728,170) 4,452,178 Profi t for the period 535,447,757 394,327,928 Profi t attributable to: Equity holders of the bank 535,447,757 394,327,928 Non-controlling interest - - Profi t for the period 535,447,757 394,327,928 Earnings per share: Basic earnings per share 21.29 19.50 Diluted earnings per Share 21.29 19.50

As per our attached report of even date

Sunil KC Pawan Kumar Golyan Nico Pijl Rajendra Kaﬂ e Harischandra Subedi Rajesh Paudel, FCA CEO Chairman Director Director Director Partner P.L. Shrestha & Co. Chartered Accountants

Pradeep Raj Pandey Rabi Shankar Sainju Sunity Shrestha Hada Navin Manandhar Mridul Parajuli Director Director Director Chief Finance Oﬃ cer Head-Finance & Planning

Date: Tuesday, 26 November, 2019 Place: NMB Bhawan, Babarmahal, Kathmandu

NMB Annual Report-2018/19 159 Statement of Other Comprehensive Income For the year ended 31 Ashad 2076

(Amount in NPR)

Restated Particulars 2075-76 2074-75

Profi t for the period 535,447,757 394,327,928 Other comprehensive income, net of income tax a) Items that will not be reclassifi ed to profi t or loss • Gains/(losses) from investment in equity instruments measured at fair value (9,069,236) (129,525,174) • Gains/(losses) on revaluation • Acturial gain/(losses) on defi ned benefi t plans - - • Income tax relating to above items 2,720,771 38,857,552 Net other comprehensive income that will not be reclassifi ed to profi t or loss (6,348,465) (90,667,622) b) Items that are or may be reclassifi ed to profi t or loss • Gains/(losses) on cash fl ow hedge • Exchange gains/(losses)(arising from translating fi nancial assets of foreign operation) • Income tax relating to above items • Reclassify to profi t or loss Net other comprehensive income that are or may be reclassifi ed to profi t 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 (6,348,465) (90,667,622) Total comprehensive income for the period 529,099,292 303,660,306 Total comprehensive income attributable to: - - Equity holders of the Bank 529,099,292 303,660,306 Non-controlling interest - - Total Comprehensive income for the period 529,099,292 303,660,306

As per our attached report of even date

Sunil KC Pawan Kumar Golyan Nico Pijl Rajendra Kaﬂ e Harischandra Subedi Rajesh Paudel, FCA CEO Chairman Director Director Director Partner P.L. Shrestha & Co. Chartered Accountants

Pradeep Raj Pandey Rabi Shankar Sainju Sunity Shrestha Hada Navin Manandhar Mridul Parajuli Director Director Director Chief Finance Oﬃ cer Head-Finance & Planning

Date: Tuesday, 26 November, 2019 Place: NMB Bhawan, Babarmahal, Kathmandu

160 www.nmbbanknepal.com Statement of Cash Flows For the year ended 31 Ashad 2076

(Amount in NPR)

Restated Particulars 2075-76 2074-75

Cash ﬂ ows from operating activities Interest Received 3,202,768,703 2,411,003,805 Fee and other income received 206,163,123 174,028,640 Dividend Received 4,740,551 9,019,825 Receipts from other operating activities - - Interest paid (2,097,260,989) (1,505,290,161) Commission and fee paid (8,214,487) (2,777,672) Cash payments to employee (358,990,274) (223,090,981) Other expense paid (91,985,144) (170,938,548) Operating cash ﬂ ows before change in operating assets and liabilities 857,221,484 691,954,909

(Increase)/Decrease in operating assets (4,732,667,062) (4,670,939,196) Due from Nepal Rastra Bank (25,927,738) (321,847,998) Placement with bank and ﬁ nancial institutions - - Other Trading assets - - Loan and advances to bank and ﬁ nancial institutions (445,262,034) (89,100,000) Loan and advances to customer (4,252,480,600) (4,255,047,908) Other Assets (8,996,689) (4,943,290)

Increase/(Decrease) in operating liabilities 4,193,949,782 5,394,217,883 Due to bank and ﬁ nancial institutions 897,019,532 (15,027,791) Due to Nepal Rastra Bank - - Deposits from customers 3,296,938,015 5,408,789,938 Borrowings - - Other Liabilities (7,766) 455,736

Net Cash ﬂ ow from operating activities before tax paid 318,504,204 1,415,233,596 Income taxes paid (246,183,247) (173,694,097) Net Cash ﬂ ow from operating activities 72,320,957 1,241,539,499

NMB Annual Report-2018/19 161 Statement of Cash Flows For the year ended 31 Ashad 2076

(Amount in NPR)

Restated Particulars 2075-76 2074-75

Cash ﬂ ows from investing activities Purchase of investment securities (74,103,070) (190,188,428) Receipts from sale of investment securities 969,960 6,315,534 Purchase of plant and equipment (30,465,804) (100,261,696) Receipt from sale of property and equipment 12,235 60,488 Purchase of intangible assets 1,828,589 (1,129,807) Receipt from sale of intangible assets Purchase of investment properties - - Receipt from the sale of investment properties Interest received Dividend received Net cash used in investing activities (101,758,090) (285,203,909)

Cash fl ows from fi nancing 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 - 287,046,026 Dividend paid - - Interest paid - - Other receipt/payment - - Net cash from fi nancing activities - 287,046,026

Net increase/(decrease) in cash and cash equivalents (29,437,133) 1,243,381,615 Cash and Cash Equivalents at Shrawan 01, 2075 4,606,754,593 3,363,268,270 Eﬀ ect of exchange rate ﬂ uctuations on cash and cash equivalents held (3,719,677) 104,709

Closing Cash and Cash Equivalents 4,573,597,783 4,606,754,593 As per our attached report of even date

Sunil KC Pawan Kumar Golyan Nico Pijl Rajendra Kaﬂ e Harischandra Subedi Rajesh Paudel, FCA CEO Chairman Director Director Director Partner P.L. Shrestha & Co. Chartered Accountants

Pradeep Raj Pandey Rabi Shankar Sainju Sunity Shrestha Hada Navin Manandhar Mridul Parajuli Director Director Director Chief Finance Oﬃ cer Head-Finance & Planning

Date: Tuesday, 26 November, 2019 Place: NMB Bhawan, Babarmahal, Kathmandu

162 www.nmbbanknepal.com ------457,897 6,315,534 1,474,521 92,480,972 (1,894,660) (4,915,070) 394,327,928 287,046,026 (90,667,622) 288,026,350 303,660,306 (90,667,622) 2,640,511,822 Total Equity Total 3,325,137,347 2,732,992,794 ------(Amount in NPR) - - - - - Non- Interest Interest Controlling Controlling ------457,897 6,315,534 1,474,521 Total Total 92,480,972 (1,894,660) (4,915,070) 394,327,928 287,046,026 (90,667,622) 288,026,350 303,660,306 (90,667,622) 2,640,511,822 3,325,137,347 2,732,992,794 ------304,433 Other 1,761,539 3,737,550 Reserve Reserve 21,091,224 18,814,389 (2,482,649) 43,226,486 21,091,224 ------508,618 457,897 (304,433) 6,315,534 2,482,649 1,474,521 90,667,622 (1,894,660) (1,761,539) (3,737,550) (4,915,070) Earning 394,327,928 376,254,209 Retained (90,667,622) (74,777,177) (18,814,389) 312,881,810 376,762,827 303,660,306 (362,734,726) (90,667,622) (361,754,401) ------Reserve Reserve Revaluation ------78,961,488 Reserve Reserve 78,961,488 (90,667,622) Fair Value Value Fair (11,706,133) ------Reserve Reserve Regulatory ------1,284 1,284 26,177 27,461 Reserve Reserve Exchange Equalisation ------Attributable to Equity-Holders of the Bank Reserve Reserve 74,751,000 General General 362,106,410 436,857,410 362,106,410 ------Share Share Premium Premium 15,372,574 28,614,713 13,242,139 28,614,713 15,372,574 (15,372,574) ------Calls in Advance 234,752,187 234,752,187 (234,752,187) (234,752,187) ------15,372,574 362,734,726 493,183,500 871,290,800 (378,107,300) 2,022,052,100 1,643,944,800 Share Capital Share 2,515,235,600 Particulars Bonus Shares Issued Bonus Shares Cash Dividend Paid ed into OCI Classifi Gain on Disposal of Share Current Tax on Gain on Disposal of Share Classifi ed into OCI Classifi on Gain Disposal of Share Tax Current Other Total Contributions by and Distributions Total Balance at Ashad 32, 2075 Adjustment/Restatement Balance at Shrawan 01, 2074 Balance at Shrawan Comprehensive Income for the year Comprehensive t for the year Profi Adjustment/Restated Balance as at Shrawan 01, 2074 Adjustment/Restated Balance as at Shrawan Income, Net of Tax Other Comprehensive Gains/(losses) from investment in equity instruments investment Gains/(losses) from at fair value measured Gains/(losses) on revaluation t plans ned benefi Acturial gain/(losses) on defi hedge ow Gains/(losses) on cash fl nancial fi translating Exchange gains/(losses)(arising from operation) assets of foreign Income for the year Comprehensive Total Adjustment of Investment Adjustment Reserve Adjustment of Investment Fund training of Employee Creation Fund training Utilization of Employee of CSR Fund Creation Utilization of CSR Fund Transfer to Reserves during the year to Reserves Transfer Utilization of Accumulated Reserve capital to share premium from Amount transferred Adjustment of deff erred tax Reserve erred Adjustment of deff during the year Reserves from Transfer in Equity recognized with Owners, directly Transactions Share Issued Share Share Based Payments Share to Equity Charged Issue Expenses Directly Share Share Issue Expenses Directly Charged to Equity-Tax Impact to Equity-Tax Charged Issue Expenses Directly Share Dividend to Equity-Holders Statement of Changes in Equity ended 31 Ashad 2076 For the year

NMB Annual Report-2018/19 163 ------969,960 678,972 (290,988) (6,348,465) 535,447,757 (6,348,465) 529,099,292 3,325,137,347 3,325,137,347 Total Equity Total 3,854,915,611 ------(Amount in NPR) Non- Interest Interest Controlling Controlling ------969,960 678,972 (290,988) Total Total (6,348,465) 535,447,757 (6,348,465) As per our attached report of even date of even As per our attached report 529,099,292 3,325,137,347 3,325,137,347 3,854,915,611 ------Rajesh Paudel, FCA Partner & Co. Shrestha P.L. Accountants Chartered Other 5,596,584 5,354,478 Reserve Reserve 43,226,486 43,226,486 (1,021,463) (5,221,026) (3,235,139) 10,091,009 (34,608,911) ------969,960 678,972 (290,988) 1,021,463 5,221,026 3,235,139 Earning 34,608,911 (5,596,584) (5,354,478) (6,348,465) Retained 312,881,810 312,881,810 535,447,757 (18,073,481) (6,348,465) 548,909,519 529,099,292 (308,812,551) ------Reserve Reserve Revaluation Harischandra Subedi Harischandra Director Mridul Parajuli & Head-Finance Planning ------(6,348,465) Reserve Reserve (11,706,133) (11,706,133) Fair Value Value Fair (18,054,599) ------18,073,481 Reserve Reserve 208,071,465 Regulatory 226,144,947 ------27,461 27,461 27,461 Rajendra Kafl e Kafl Rajendra Director Navin Manandhar cer Offi Chief Finance Reserve Reserve Exchange Equalisation ------Attributable to Equity-Holders of the Bank Reserve Reserve General General 107,089,551 436,857,410 436,857,410 543,946,962 ------Share Share 28,614,713 28,614,713 Premium Premium 28,614,713 ------Sunity Shrestha Hada Sunity Shrestha Director Nico Pijl Director Calls in Advance ------2,515,235,600 2,515,235,600 Share Capital Share 2,515,235,600 Rabi Shankar Sainju Director Pawan Kumar Golyan Chairman Balance at Ashad 31, 2076 Total Contributions by and Distributions Total Current Tax on Gain on Disposal of Share Classifi ed into OCI Classifi on Gain Disposal of Share Tax Current Other Transfer from Reserves during the year Reserves from Transfer Transactions with Owners, directly recognized in Equity recognized with Owners, directly Transactions Amount transferred from premium to share capital to share premium from Amount transferred Share Issued Share Share Issue Expenses Directly Charged to Equity Charged Issue Expenses Directly Share Share Issue Expenses Directly Charged to Equity-Tax Impact to Equity-Tax Charged Issue Expenses Directly Share Share Based Payments Share Dividend to Equity-Holders Bonus Shares Issued Bonus Shares Cash Dividend Paid Gain on Disposal of Share Classifi ed into OCI Classifi Gain on Disposal of Share Adjustment of Deferred Tax Reserve into Regulatory Reserve Reserve Tax Adjustment of Deferred Particulars Transfer to Reserves during the year to Reserves Transfer Gains/(losses) on revaluation Acturial gain/(losses) on defi ned benefi t plans ned benefi Acturial gain/(losses) on defi Gains/(losses) on cash fl ow hedge ow Gains/(losses) on cash fl Exchange gains/(losses)(arising from translating fi nancial fi translating Exchange gains/(losses)(arising from operation) assets of foreign Total Comprehensive Income for the year Comprehensive Total Adjustment of Investment Adjustment Reserve Adjustment of Investment Creation of Employee training Fund training of Employee Creation Utilization of Employee training Fund training Utilization of Employee Creation of CSR Fund Creation Utilization of CSR Fund Adjustment of deff erred tax Reserve erred Adjustment of deff Balance at Shrawan 01, 2075 Balance at Shrawan Adjustment/Restated Balance as at Shrawan 01, 2075 Adjustment/Restated Balance as at Shrawan Gains/(losses) from investment in equity instruments investment Gains/(losses) from at fair value measured Adjustment/Restatement Comprehensive Income for the year Comprehensive Profi t for the year Profi Other Comprehensive Income, Net of Tax Other Comprehensive Pradeep Raj Pandey Pradeep Director 2019 26 November, Date: Tuesday, Place: NMB Bhawan, Babarmahal, Kathmandu Statement of Changes in Equity ended 31 Ashad 2076 For the year Sunil KC CEO

164 www.nmbbanknepal.com Statement of Distributable Proﬁ t or Loss For the year ended 31 Ashad 2076 (As per NRB Regulation) (Amount in NPR)

Particulars 31 Ashad 2076 32 Ashad 2075

Net profi t or (loss) as per statement of profi t or loss 535,447,757 394,327,928 Appropriations: a. General reserve (107,089,551) (78,865,586) b. Foreign exchange fl uctuation fund - c. Capital redemption reserve d. Corporate social responsibility fund (5,354,478) (3,943,279) e. Employees' training fund (375,558) (592,843) f. Other - -

Profi t or (loss) before regulatory adjustment 422,628,170 310,926,220 Regulatory adjustment : a. Interest receivable (-)/previous accrued interest received (+) (176,451,580) - b. Short loan loss provision in accounts (-)/reversal (+) - - c. Short provision for possible losses on investment (-)/reversal (+) (31,048,379) - d. Short loan loss provision on Non Banking Assets (-)/reversal (+) (571,506) - e. Deferred tax assets recognised (-)/ reversal (+) (18,073,481) - f. Goodwill recognised (-)/ impairment of Goodwill (+) g. Bargain purchase gain recognised (-)/resersal (+) h. Acturial loss recognised (-)/reversal (+) - - i. Other (+/-) Lease Payment - - Dividend Income from Associates - - Income Attributable from Associates - - Share Issue Expenses Directly Charged to Equity - - Share Issue Expenses Directly Charged to Equity-Tax Impact - - Gain on Disposal of Share Classifi ed into OCI - - Current Tax on Gain on Disposal of Share Classifi ed into OCI - - Distributable profi t or (loss) 196,483,223 310,926,220

NMB Annual Report-2018/19 165 ------4.1 4.2 4.3 18,956,928 380,168,136 800,622,192 800,622,192 2,964,143,206 3,363,268,270 2073-74 2073-74 2073-74 ------7,098,270 535,417,759 1,122,470,190 4,064,238,564 1,122,470,190 4,606,754,593 2074-75 2074-75 2074-75 ------557,277,513 1,148,397,928 4,016,320,269 1,148,397,928 4,573,597,783 2075-76 2075-76 2075-76 Particulars Particulars Particulars Cash and cash equivalent Bank Nepal Rastra Due from Institutions Placements with Bank and Financial Cash in Hand Statutory balances with NRB Placement with domestic B/FIs Balances with B/Fis agreement under resale Securities purchased B/FIs Placement with Foreign Other deposit and receivable from NRB from Other deposit and receivable for impairement Less: Allowances Money at call and short notice Total Total Other Total Notes to Financial Statements Notes to Financial ended 31 Ashad 2076 For the year

166 www.nmbbanknepal.com ------4.4 4.5 2073-74 2073-74 ------2074-75 2074-75 ------2075-76 2075-76 Particulars Particulars Derivative Financial Instruments Financial Derivative assets Other Trading Held for trading Bills Treasury Interest rate swap rate Interest Government bond Government Forward exchange contract Forward NRB bonds Others bonds Domestic Corporate Held for risk management Equities Interest rate swap rate Interest Other Forward exchange contract Forward Total Others Pledged Total Non- Pledged

NMB Annual Report-2018/19 167 - - - 4.6 4.7 400,000 (59,329) 340,671 (340,671) 34,067,121 33,726,450 (60,904,588) (157,963,002) 14,167,124,120 13,948,256,529 13,948,256,529 2073-74 2073-74 2073-74 - - 340,671 900,000 1,240,671 (1,240,671) 124,067,121 (48,830,001) 122,826,450 (216,037,025) 18,445,467,210 18,180,600,184 18,180,600,184 2074-75 2074-75 2074-75 - - 1,240,671 4,497,596 5,738,268 (5,738,268) 573,826,752 568,088,484 (152,328,743) (290,246,220) 22,803,181,079 22,360,606,116 22,360,606,116 2075-76 2075-76 2075-76 Particulars Particulars Loans and advances to B/FIs for Impairment 4.6.1 Allowances Particulars Loans and advances to customers Loan to Microfi nance Institutions Loan to Microfi at amortized Loans and advances measured Balance as at Shrawan 1 Balance as at Shrawan Other Impairment loss for the year: for the year Charge Less: Impairment allowances Individual Impairment Recoveries/Reversal Amount written off Balance as at Ashad end Less: Allowances for Impairment Less: Allowances Portfolio Impairment Total Net amount Loan and advances measured at FVTPL Loan and advances measured Total Notes to Financial Statements Notes to Financial ended 31 Ashad 2076 For the year

168 www.nmbbanknepal.com ------57,251,150 84,175,533 922,053,945 465,892,299 145,321,204 669,906,369 1,757,986,732 2,915,647,362 2,543,766,263 4,605,185,680 14,167,124,120 14,167,124,120 14,083,011,003 14,167,186,536 2073-74 2073-74 ------94,675,114 335,500,000 221,570,469 592,298,739 113,720,715 3,949,037,973 2,367,098,327 3,526,956,666 1,820,211,512 2,681,660,230 2,742,737,464 18,445,467,210 18,445,467,210 18,331,746,495 18,445,467,210 2074-75 2074-75 ------391,359,856 308,868,951 573,760,654 107,022,427 176,451,580 4,217,065,925 2,091,996,955 3,624,483,736 2,389,896,809 2,439,189,503 6,483,084,683 22,803,181,079 22,803,181,079 22,626,729,499 22,803,181,079 2075-76 2075-76 4.7.1 Analysis of loan and advances - By product Particulars 4.7.2 Analysis of loan and advances - By Currency Particulars Product Loans Term Nepalese Rupee Overdraﬅ Overdraﬅ Indian Rupee Trust Receipt/Import Loans Trust United States Dollar Demand and other Working Capital Loans Demand and other Working Great Britain Pound Great Personal Residential Loans Euro Real Estate Loans Japanese Yen Margin Lending Loans Margin Chinese Yuan Hire Purchase Loans Purchase Hire Other Deprived Sector Loans Deprived Grand Total Grand Bills Purchased Staﬀ s Loans Staﬀ Other Sub-total Interest Receivable Interest Grand Total Grand

NMB Annual Report-2018/19 169 - - - - - 4,067,120 1,181,640 30,000,000 774,643,528 506,143,440 194,294,080 12,656,794,312 14,167,124,120 14,167,124,120 2073-74 - - - - - 4,067,120 16,456,586 750,786,357 120,000,000 241,893,840 135,877,394 17,176,385,913 18,445,467,210 18,445,467,210 2074-75 - - - - - 4,067,120 27,487,674 59,645,522 902,180,082 459,151,746 300,752,281 21,049,896,654 22,803,181,079 22,803,181,079 2075-76 4.7.3 Analysis of loan and advances - By Collateral Particulars Secured Assets Moveable/Immoveable Gold and Silver Guarantee of Domestic BFIs Guarantee Government Guarantee Government Guarantee of International Rated Bank Guarantee Collateral of Export Document Collateral Collateral of Fixed Deposit Receipt of Fixed Collateral Collatereal of Government Securities of Government Collatereal Counter Guarantee Personal Guarantee Other Collateral Sub Total Unsecured Grand Total Grand Notes to Financial Statements Notes to Financial ended 31 Ashad 2076 For the year

170 www.nmbbanknepal.com - - - - - 4.8 8,272,724 8,272,724 50,572,865 50,572,865 52,631,864 527,032,052 267,067,964 60,904,588 794,100,017 107,390,138 157,963,003 218,867,591 2073-74 2073-74 - - 58,074,023 58,074,023 60,904,588 613,040,083 241,723,188 48,830,001 (12,074,587) (12,074,587) 854,763,271 157,963,003 216,037,025 264,867,027 2074-75 2074-75 - - - - - 27,082,884 27,082,884 48,830,001 624,595,438 295,201,666 75,912,885 150,625,052 150,625,052 919,797,104 216,037,025 366,662,078 442,574,963 2075-76 2075-76 Particulars 4.7.4 Allowances for Impairment 4.7.4 Allowances Particulars in securities Investment Investment securities designated at FVTPL Investment Specifi c allowances for impairment c allowances Specifi 1 Balance at Shrawan Investment securities measured at amortized cost securities measured Investment Impairment loss for the year: Charge for the year Charge during the year Recoveries/reversal at FVTOCI in equity measured Investment Write- off s off Write- currency variance on foreign Exchange rate Other movement Balance at Ashad end Total Collective allowances for impairment allowances Collective 1 Balance at Shrawan Impairment loss for the year: Charge/(reversal) for the year Charge/(reversal) Exchange rate variance on foreign currency variance on foreign Exchange rate Other movement Other movement Balance at Ashad end Total allowances for impairment allowances Total

NMB Annual Report-2018/19 171 - - - 2,060,375 22,228,363 267,067,964 265,007,590 504,803,689 527,032,052 2073-74 2073-74 - - - - 3,841,119 241,723,188 237,882,069 613,040,083 613,040,083 2074-75 2074-75 - - - - - 3,020,400 295,201,666 292,181,266 624,595,438 624,595,438 2075-76 2075-76 4.8.1 Investment in securities measured at amortized cost in securities measured 4.8.1 Investment Particulars income other Other comprehensive at fair value through in equity measured 4.8.2 Investment Particulars Total Equity Instrument Quoted equity securities Government Bond Government Debt Securities Unquoted equity securities Government treasury bills treasury Government Nepal Rastra Bank bonds Nepal Rastra Nepal Rastra Bank deposit instruments Nepal Rastra Other for impairment c allowances Less: Speciﬁ Total Notes to Financial Statements Notes to Financial ended 31 Ashad 2076 For the year

172 www.nmbbanknepal.com ------2,530 81,548 912,898 9,393,993 5,739,750 4,671,900 38,694,181 14,362,910 16,432,677 29,247,920 110,347,930 Fair Value Value Fair ------2073-74 1,000 3,700 463,400 7,909,230 4,589,585 2,480,925 9,278,544 37,972,700 14,362,910 13,417,806 29,247,920 Cost 1,500 62,640 718,270 8,046,331 3,473,192 5,303,529 1,178,680 8,946,000 9,251,671 9,190,000 33,302,058 14,161,829 14,774,791 23,690,815 22,944,000 18,560,000 10,034,379 Fair Value Value Fair 2074-75 1,000 3,700 463,400 889,583 7,909,730 4,797,680 4,589,585 9,971,704 9,677,480 9,567,636 37,972,700 14,362,910 14,554,668 29,247,920 24,000,000 20,000,000 10,000,000 Cost 900 74,543 36,176 7,340,791 4,078,515 4,968,328 1,974,590 7,676,520 9,764,577 31,821,123 13,400,595 14,702,719 22,316,163 22,560,000 20,360,000 10,280,000 10,291,183 Fair Value Value Fair - 2075-76 1,000 6,800 7,909,730 5,883,915 4,589,585 1,894,758 9,971,704 9,677,480 9,567,636 37,972,700 14,362,910 13,417,806 30,384,783 24,000,000 20,000,000 10,000,000 Cost Particulars Investment in quoted equity Investment NIBL samriddhi Fund 792,742 Shares of Rs.10 Each Fully Paidup 792,742 Shares Power Sanima Mai Hrydro 16,647 shares (Including 1058 bonus share) of Rs.100 Each Fully Paidup (Including 1058 bonus share) 16,647 shares Fund1 NMB Sulav Investment 459,180 Mutual fund of Rs.10 Each Fully Paidup Co. Ltd. Power Barun Hydro 10 Shares of Rs.100 Each Fully Paidup 10 Shares Co. Limited Jalvidyut Lagani and Vikash 463 bonus Shares of Rs.100 Each Fully Paidup 463 bonus Shares Global IME Sammunati Scheme 3,797,270 Mutual Fund of Rs.10 Each Fully Paidup Nabil Equity Fund 1,436,291 Mutual Fund of Rs.10 Each Fully Paidup Sanstha Limited Vittiya Finance Micro Mero 68 Shares of Rs.100 Each Fully Paidup 68 Shares Co. Ltd. Power Chilime Hydro 3,790 Shares (Including 790 Bonus share) of Rs.100 Each Fully Paidup (Including 790 Bonus share) 3,790 Shares Fund Laxmi Value 1,441,443 Shares of Rs.10 Each Fully Paidup 1,441,443 Shares Co. Ltd. Nepal Life Insurance 8,520 Shares (Including 4650 Bonus share) of Rs.100 Each Fully Paidup (Including 4650 Bonus share) 8,520 Shares Laxmi Equity Fund 2,924,792 Mutual Fund of Rs.10 Each Fully Paidup Siddhartha Equity Fund 967,748 Mutual Fund of Rs.10 Each Fully Paidup Sanima Equity Fund 2,400,000 Mutual Fund of Rs.10 Each Fully Paidup Citizens Mutual Fund1 2,000,000 Mutual Funds of Rs.10 Each Fully Paidup Fund NIC Asia Growth 1,000,000 Mutual funds of Rs.10 Each Fully Paidup Siddhartha Equity oriented Scheme 951,126 Shares of Rs.10 Each Fully Paidup 951,126 Shares 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 4.8.3 Information relating to investment in equities to investment 4.8.3 Information relating

NMB Annual Report-2018/19 173 ------19,000 77,004 28,340 68,304 19,545 23,200 31,579 19,790 22,100 83,746 114,917 152,277 241,310 500,000 217,387 142,680 160,046 1,571,400 1,949,000 7,577,550 1,342,988 2,060,375 12,543,495 10,274,070 265,007,590 267,067,964 Fair Value Value Fair ------2073-74 1,000 5,200 2,400 1,500 8,200 2,000 2,300 1,000 8,600 1,000 2,600 33,700 57,900 35,000 59,000 27,000 500,000 1,263,642 1,130,013 7,432,084 1,070,700 1,597,700 12,619,210 10,274,070 Cost 152,668,138 154,265,838 - - - - 12,480 52,644 76,700 15,620 56,700 11,055 15,620 21,420 31,855 15,260 558,900 103,668 270,784 182,790 107,604 2,436,800 4,555,000 1,380,000 4,488,100 2,955,000 2,814,000 9,246,663 2,285,000 1,500,000 2,070,335 3,841,119 12,228,014 10,591,490 237,882,069 241,723,188 Fair Value Value Fair - - - - 2074-75 1,000 5,200 2,400 1,500 8,200 2,000 2,300 1,600 8,600 1,000 57,900 35,000 29,500 27,000 721,759 2,380,429 5,126,650 2,127,428 3,119,113 3,535,783 2,927,859 2,505,000 1,500,000 1,070,200 2,597,200 12,619,210 10,274,070 12,345,840 Cost 255,849,035 258,446,235 ------429 4,950 9,702 1,455 30,600 12,020 25,944 24,273 303,625 617,320 236,200 2,124,720 1,228,500 5,385,700 4,626,000 1,568,160 7,643,908 4,090,000 1,500,000 1,284,200 12,657,068 10,180,170 50,000,000 10,000,000 63,020,400 232,181,266 295,201,666 Fair Value Value Fair ------2075-76 1,000 2,000 1,600 2,500 35,000 27,000 288,273 721,759 2,500,429 2,197,428 4,016,713 6,144,908 3,556,188 4,049,026 1,500,000 1,070,200 12,619,210 10,274,070 12,345,840 50,000,000 10,000,000 62,597,200 Cost 285,396,750 320,993,950 Particulars Relaible Microfi nance Co Ltd Relaible Microfi National Life Insurance Co. Ltd. National Life Insurance 10 Shares of Rs.100 Each Fully Paidup 10 Shares trust Citizens Investment 3,632 Shares (Including 432 Bonus share) of Rs.100 Each Fully Paidup (Including 432 Bonus share) 3,632 Shares Co. Ltd. Siddartha Insurance 125 shares of Rs.100 Each Fully Paidup 125 shares Soalte Hotel Ltd 2700 Share of Rs.100 Each Fully Paidup 2700 Share Co. Ltd. Insurance Lumbini General 2530 Shares (Including 530 Bonus Share) of Rs.100 Each Fully Paidup (Including 530 Bonus Share) 2530 Shares co Ltd United modi Hydropower 53,857 Shares of Rs.100 Each Fully Paidup 53,857 Shares Co. Ltd. Sikhar Insurance 337 shares of Rs.100 Each Fully Paidup 337 shares co Ltd Nyadi Hydropower 6,000 Shares of Rs.100 Each Fully Paidup 6,000 Shares Co. Limited Sagarmatha Insurance 636 shares of Rs.100 Each Fully Paiduph 636 shares Ltd Ridi Hydropower 2,592 Shares of Rs.100 Each Fully Paidup 2,592 Shares Co. Limited Power Hydro Arun kaveli 340 shares of Rs.100 Each Fully Paidup 340 shares NMB Hybrid Fund 295 Shares of Rs.100 Each Fully Paidup 295 Shares Limited Power Api Hydro 1261921 shares of Rs.10 Each Fully Paidup 1261921 shares Fund NIBL Pragati 3 bonus Shares of Rs.100 Each Fully Paidup 3 bonus Shares Co. Limited Butwal Power 1,027,407 Shares of Rs.10 Each Fully Paidup 1,027,407 Shares Subtotal Investment in Unquoted equity Investment Capital Limited Prabhu 10000 Shares (Including 500 bonus share) of Rs.100 Each Fully Paidup (Including 500 bonus share) 10000 Shares Nepal Dur Sanchar Co. Limited 15,000 promotor shares of Rs.100 Each Fully Paidup shares 15,000 promotor Ltd Information Bureau Credit 14,690 Shares of Rs.100 Each Fully Paidup 14,690 Shares anance Ltd NMB Microfi 2,362 Shares of Rs.100 Each Fully Paidup 2,362 Shares Nepal Clearing House Ltd 5 Bonus shares of Rs.100 Each Fully Paidup 5 Bonus shares nance co Ltd Global IME Microfi 12,842 Shares (Including 2140 Bonus Share) of Rs.100 Each Fully Paidup (Including 2140 Bonus Share) 12,842 Shares Mahalaxmi Insurance 11 shares (Including 1 Bonus share) of Rs.100 Each Fully Paidup (Including 1 Bonus share) 11 shares bank Co Ltd Kalika Mai Development 500,000 Promotor shares of Rs.100 Each Fully Paidup shares 500,000 Promotor Nabil Balance Fund 135 shares of Rs.100 Each Fully Paidup 135 shares nance Co Ltd Mahila Sahayatri microfi 100,000 shares of Rs.10 Each Fully Paidup 100,000 shares Subtotal Grand Total Total Grand 22 shares of Rs.100 Each Fully Paidup 22 shares Bijaya Laghubitta Co Ltd 3 Bonus shares of Rs.100 Each Fully Paidup 3 Bonus shares nance Ltd Microfi Womi 23 Shares (Including 7 bonus share) of Rs.100 Each Fully Paidup (Including 7 bonus share) 23 Shares Laxmi Laghubitta Sanstah Ltd 98 Shares of Rs.100 Each Fully Paidup 98 Shares nance co Ltd Microfi Mirmire 27 Shares (Inculuding 2 Bonus Share) of Rs.100 Each Fully Paidup (Inculuding 2 Bonus Share) 27 Shares nance co Ltd Microfi Forward 26 shares of Rs.100 Each Fully Paidup 26 shares 1 2 3 4 5 40 36 18 37 19 38 20 39 21 22 41 23 42 24 43 25 26 27 28 29 30 31 32 33 34 35 4.8.3 Information relating to investment in equities to investment 4.8.3 Information relating Notes to Financial Statements Notes to Financial ended 31 Ashad 2076 For the year

174 www.nmbbanknepal.com ------19,000 77,004 28,340 68,304 19,545 23,200 31,579 19,790 22,100 83,746 114,917 152,277 241,310 500,000 217,387 142,680 160,046 1,571,400 1,949,000 7,577,550 1,342,988 2,060,375 12,543,495 10,274,070 265,007,590 267,067,964 Fair Value Value Fair ------2073-74 1,000 5,200 2,400 1,500 8,200 2,000 2,300 1,000 8,600 1,000 2,600 33,700 57,900 35,000 59,000 27,000 500,000 1,263,642 1,130,013 7,432,084 1,070,700 1,597,700 12,619,210 10,274,070 Cost 152,668,138 154,265,838 - - - - 12,480 52,644 76,700 15,620 56,700 11,055 15,620 21,420 31,855 15,260 558,900 103,668 270,784 182,790 107,604 2,436,800 4,555,000 1,380,000 4,488,100 2,955,000 2,814,000 9,246,663 2,285,000 1,500,000 2,070,335 3,841,119 12,228,014 10,591,490 237,882,069 241,723,188 Fair Value Value Fair - - - - 2074-75 1,000 5,200 2,400 1,500 8,200 2,000 2,300 1,600 8,600 1,000 57,900 35,000 29,500 27,000 721,759 2,380,429 5,126,650 2,127,428 3,119,113 3,535,783 2,927,859 2,505,000 1,500,000 1,070,200 2,597,200 12,619,210 10,274,070 12,345,840 Cost 255,849,035 258,446,235 ------429 4,950 9,702 1,455 30,600 12,020 25,944 24,273 303,625 617,320 236,200 2,124,720 1,228,500 5,385,700 4,626,000 1,568,160 7,643,908 4,090,000 1,500,000 1,284,200 12,657,068 10,180,170 50,000,000 10,000,000 63,020,400 232,181,266 295,201,666 Fair Value Value Fair ------2075-76 1,000 2,000 1,600 2,500 35,000 27,000 288,273 721,759 2,500,429 2,197,428 4,016,713 6,144,908 3,556,188 4,049,026 1,500,000 1,070,200 12,619,210 10,274,070 12,345,840 50,000,000 10,000,000 62,597,200 Cost 285,396,750 320,993,950 Particulars Relaible Microfi nance Co Ltd Relaible Microfi National Life Insurance Co. Ltd. National Life Insurance 10 Shares of Rs.100 Each Fully Paidup 10 Shares trust Citizens Investment 3,632 Shares (Including 432 Bonus share) of Rs.100 Each Fully Paidup (Including 432 Bonus share) 3,632 Shares Co. Ltd. Siddartha Insurance 125 shares of Rs.100 Each Fully Paidup 125 shares Soalte Hotel Ltd 2700 Share of Rs.100 Each Fully Paidup 2700 Share Co. Ltd. Insurance Lumbini General 2530 Shares (Including 530 Bonus Share) of Rs.100 Each Fully Paidup (Including 530 Bonus Share) 2530 Shares co Ltd United modi Hydropower 53,857 Shares of Rs.100 Each Fully Paidup 53,857 Shares Co. Ltd. Sikhar Insurance 337 shares of Rs.100 Each Fully Paidup 337 shares co Ltd Nyadi Hydropower 6,000 Shares of Rs.100 Each Fully Paidup 6,000 Shares Co. Limited Sagarmatha Insurance 636 shares of Rs.100 Each Fully Paiduph 636 shares Ltd Ridi Hydropower 2,592 Shares of Rs.100 Each Fully Paidup 2,592 Shares Co. Limited Power Hydro Arun kaveli 340 shares of Rs.100 Each Fully Paidup 340 shares NMB Hybrid Fund 295 Shares of Rs.100 Each Fully Paidup 295 Shares Limited Power Api Hydro 1261921 shares of Rs.10 Each Fully Paidup 1261921 shares Fund NIBL Pragati 3 bonus Shares of Rs.100 Each Fully Paidup 3 bonus Shares Co. Limited Butwal Power 1,027,407 Shares of Rs.10 Each Fully Paidup 1,027,407 Shares Subtotal Investment in Unquoted equity Investment Capital Limited Prabhu 10000 Shares (Including 500 bonus share) of Rs.100 Each Fully Paidup (Including 500 bonus share) 10000 Shares Nepal Dur Sanchar Co. Limited 15,000 promotor shares of Rs.100 Each Fully Paidup shares 15,000 promotor Ltd Information Bureau Credit 14,690 Shares of Rs.100 Each Fully Paidup 14,690 Shares anance Ltd NMB Microfi 2,362 Shares of Rs.100 Each Fully Paidup 2,362 Shares Nepal Clearing House Ltd 5 Bonus shares of Rs.100 Each Fully Paidup 5 Bonus shares nance co Ltd Global IME Microfi 12,842 Shares (Including 2140 Bonus Share) of Rs.100 Each Fully Paidup (Including 2140 Bonus Share) 12,842 Shares Mahalaxmi Insurance 11 shares (Including 1 Bonus share) of Rs.100 Each Fully Paidup (Including 1 Bonus share) 11 shares bank Co Ltd Kalika Mai Development 500,000 Promotor shares of Rs.100 Each Fully Paidup shares 500,000 Promotor Nabil Balance Fund 135 shares of Rs.100 Each Fully Paidup 135 shares nance Co Ltd Mahila Sahayatri microfi 100,000 shares of Rs.10 Each Fully Paidup 100,000 shares Subtotal Grand Total Total Grand 22 shares of Rs.100 Each Fully Paidup 22 shares Bijaya Laghubitta Co Ltd 3 Bonus shares of Rs.100 Each Fully Paidup 3 Bonus shares nance Ltd Microfi Womi 23 Shares (Including 7 bonus share) of Rs.100 Each Fully Paidup (Including 7 bonus share) 23 Shares Laxmi Laghubitta Sanstah Ltd 98 Shares of Rs.100 Each Fully Paidup 98 Shares nance co Ltd Microfi Mirmire 27 Shares (Inculuding 2 Bonus Share) of Rs.100 Each Fully Paidup (Inculuding 2 Bonus Share) 27 Shares nance co Ltd Microfi Forward 26 shares of Rs.100 Each Fully Paidup 26 shares 1 2 3 4 5 40 36 18 37 19 38 20 39 21 22 41 23 42 24 43 25 26 27 28 29 30 31 32 33 34 35 4.8.3 Information relating to investment in equities to investment 4.8.3 Information relating

NMB Annual Report-2018/19 175 ------4.9 4.10 165,826,608 165,826,608 174,182,173 174,182,173 (8,355,564) 174,182,173 Fair Value Value Fair 2073-74 2073-74 - - - 2073-74 Cost ------(1,207,448) 164,918,393 164,918,393 179,648,311 178,440,863 178,440,863 (13,522,470) 2074-75 2074-75 Fair Value Value Fair - - - 2074-75 - - - - - Cost 232,369,789 232,369,789 205,466,362 205,466,362 26,903,428 205,466,362 - - - 2075-76 2075-76 Fair Value Value Fair - - - 2075-76 Cost Particulars Particulars …...... Ltd of Rs…. Each ….....shares Current tax Assets/Liability Current In subsidiaries Investment In quoted subsidiaries 4.10.1 Investment Particulars …...... Ltd of Rs…. Each ….....shares Current tax assets Current in Quoted Subsidiaries Investment Total Investment in Unquoted Subsidiaries Investment Current year Income Tax Assets Income Tax year Current Total Investment Total Tax Assets of Prior Periods Tax tax liabilities Current Less: Impairment Allowances Amount Net Carrying Current year Income Tax Liabilities Income Tax year Current Tax Liabilities of Prior Periods Tax Total of income tax assets/(liabilities) Total Notes to Financial Statements Notes to Financial ended 31 Ashad 2076 For the year

176 www.nmbbanknepal.com ------4.11 Fair Value Value Fair Fair Value Value Fair - - - 2073-74 2073-74 - - - - 2073-74 Cost Cost ------Fair Value Value Fair - - - 2074-75 2074-75 2074-75 Fair Value Value Fair Cost - - - - 2074-75 - - - Group Cost Percentage of owneship Percentage Fair Value Value Fair ------2075-76 2075-76 2075-76 Fair Value Value Fair Cost - - - - 2075-76 Cost Net Carrying Amount Net Carrying Less: Impairment Allowances Total Investment Total Investment in Unquoted associates Investment Investment in Quoted associates Investment …...... Ltd of Rs…. Each ….....shares …...... Ltd …...... Ltd Particulars 4.10.2 Investment In unquoted subsidiaries 4.10.2 Investment Particulars to subsidiaries of the bank 4.10.3 Information relating Particulars of the Subsidiaries Interest 4.10.4: Non Controlling In associates Investment Equity Interest held by NCI (%) Equity Interest t (Loss) allocated during the year Proﬁ Accumulated Balances of NCI as on Ashad End Dividend Paid to NCI …...... Ltd of Rs…. Each ….....shares Total

NMB Annual Report-2018/19 177 ------Fair Value Value Fair Value Fair ------2073-74 2073-74 2073-74 Cost Cost ------Fair Value Value Fair Value Fair - - - - - 2074-75 2074-75 2074-75 Percentage of owneship of owneship Percentage Cost Cost ------Fair Value Value Fair Value Fair - - - - - 2075-76 2075-76 2075-76 Cost Cost Total …...... Ltd of Rs…. Each ….....shares Total …...... Ltd of Rs…. Each ….....shares 4.11.1 Investment In quoted associates 4.11.1 Investment Particulars In unquoted associates 4.11.2 Investment Particulars to associates of the bank 4.11.3 Information relating Particulars Total Notes to Financial Statements Notes to Financial ended 31 Ashad 2076 For the year

178 www.nmbbanknepal.com - - - - - 4.12 2073-74 ------2074-75 2074-75 ------Group Group 2075-76 2075-76 Total Addition/(Disposal) during the year Adjustment/Transfer Accumulated depreciation Accumulated impairment loss Net Amount Investment Properties measured at Cost measured Properties Investment 01 Balance as on Shrawan Net Changes in fair value during the year Adjustment/Transfer Net Amount Addition/(Disposal) during the year Investment Properties measured at Fair Value at Fair measured Properties Investment 01 Balance as on Shrawan Total Particulars 4.11.4: Equity value of associates Properties Investment

NMB Annual Report-2018/19 179 - - - - 4.13 43,049,133 98,210,037 (5,019,598) (5,208,130) end 2075 98,210,037 389,255,633 296,253,726 389,255,633 211,158,529 178,097,104 178,097,104 140,067,569 Total Ashad Total - - - - 51,831,714 25,388,350 25,388,350 (7,857,569) (8,385,099) end 2076 Total Ashad Total 184,187,635 211,158,529 156,186,157 222,071,249 406,258,884 - - - - 5,208,939 5,208,939 13,486,021 10,747,218 24,960,427 (4,736,257) (2,737,040) (5,069,541) (2,812,800) & others 34,172,615 42,782,981 28,645,534 51,448,278 42,698,515 34,688,336 85,620,893 85,481,496 24,960,427 63,333,869 Equipment ------Machinery ------(602,647) (623,733) 6,100,065 4,926,155 2,179,438 2,179,438 13,887,833 Furniture Furniture & Fixtures & Fixtures 19,662,257 23,603,971 14,642,293 30,733,566 25,236,147 20,309,992 50,395,822 48,840,118 13,887,833 34,952,285 - - - - (317,400) (807,376) (317,400) (905,500) 3,037,700 3,037,700 Vehicles Vehicles 13,198,455 11,350,727 14,369,100 27,979,923 38,140,678 35,220,428 39,864,572 26,983,517 16,440,166 67,844,495 65,124,195 14,369,100 51,660,595 - - - - 7,864,214 7,642,528 2,504,137 2,504,137 15,837,471 (2,201,265) (1,475,182) (2,374,424) (1,489,829) 15,823,450 21,356,687 13,176,392 35,939,662 30,276,713 24,109,366 51,763,112 51,633,400 15,837,471 37,285,758 Accessories Computer & ------7,662,640 10,463,096 12,458,137 12,458,137 29,155,206 66,034,440 64,039,398 42,546,832 56,029,897 45,566,801 37,904,161 29,155,206 80,450,993 Properties Properties Leasehold 122,064,337 109,606,200 ------719,864 719,864 6,342,000 7,061,863 7,781,727 8,055,275 7,335,412 6,615,548 Building 14,397,275 14,397,275 14,397,275 ------Land 14,172,950 14,172,950 14,172,950 14,172,950 14,172,950 14,172,950 Particulars As on Ashad end 2076 As on Ashad end 2075 Capital Work in Progress 2074 in Progress Capital Work 2075 in Progress Capital Work 2076 in Progress Capital Work Net Book Value As on Ashad end 2074 Adjustment As on Ashad end 2076 Impairment for the year Disposals Depreciation charge for the year charge Depreciation As on Ashad end 2075 Adjustment Disposals Impairment for the year Depreciation charge for the year charge Depreciation Depreciation and Impairment Depreciation 01. 2074 As on Shrawan Adjustment/Revaluation Balance as on Ashad end 2076 Capitalization Disposal during the year Acquisition Addition during the Year Balance as on Ashad end 2075 Adjustment/Revaluation Disposal during the year Capitalization Acquisition Addition during the year Cost 2074 As on Shrawan Property and Equipment Property Notes to Financial Statements Notes to Financial ended 31 Ashad 2076 For the year

180 www.nmbbanknepal.com ------4.14 446,350 2,274,939 2,240,192 3,369,999 3,369,999 4,384,560 6,213,148 5,083,341 14,033,760 19,117,101 18,548,890 16,273,951 22,933,450 22,487,100 Total Ashad end Total ------Other ------Developed - - - So ware So 446,350 2,274,939 2,240,192 3,369,999 3,369,999 4,384,560 6,213,148 5,083,341 14,033,760 19,117,101 18,548,890 16,273,951 22,933,450 22,487,100 Purchased ------Goodwill As on Ashad end 2076 As on Ashad end 2075 Capital Work in Progress Capital Work Net Book Value As on Ashad end 2074 Disposals Adjustment As on Ashad end 2076 Impairment for the year Amortisation charge for the year Amortisation charge Disposals Adjustment As on Ashad end 2075 Impairment for the year Amortisation charge for the year Amortisation charge Amortisation and Impairment 01. 2074 As on Shrawan Capitalization Disposal during the year Adjustment/Revaluation Balance as on Ashad end 2076 Addition during the Year Acquisition Balance as on Ashad end 2075 Adjustment/Revaluation Capitalization Disposal during the year Acquisition Addition during the year Cost 01 2074 As on Shrawan Particulars Goodwill and Intangible Assets

NMB Annual Report-2018/19 181 Notes to Financial Statements For the year ended 31 Ashad 2076

Deferred Taxes Assets/(Liabilities) 4.15 2073-74 Particulars Net Deferred Tax Deferred Tax Assets Deferred Tax Liabilities Assets /(Liabilities) Deferred tax on temporary diff erences on following items Loans and Advances to BFIs - - - Loans and Advances to Customers - (25,252,660) (25,252,660) Assets held for Sale - - Investment Properties - - - Investment Securities - (33,840,638) (33,840,638) Investment In Associates - - - Property and Equipment - 651,772 651,772 Employees' Defi ned Benefi t Plan 8,749,575 - 8,749,575 Employees' Leave Liability 7,707,003 - 7,707,003 Lease Liabilities 2,204,114 - 2,204,114 Provisions LLP - - - Other Temporary Diff erences - - - Deferred tax on temporary diff erences 18,660,692 (58,441,526) (39,780,834) Deferred tax on carry forward of unused tax losses - - - Deferred tax due to changes in tax rate - - - Net Deferred Tax Asset (Liabilities) as on year end of (39,780,834) 2073/74 Deferred Tax Asset/(Liabilities) as on Shrawan 01, 2073 7,948,845 Origination/(Reversal) during the year (47,729,679)

Deferred Tax (expense)/income recognized in proﬁ t or loss - Deferred Tax (expense)/income recognized in Other - Comprehensive Income Deferred Tax (expense)/income recognized directly in equity (47,729,679)

182 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

2074-75 Particulars Net Deferred Tax Deferred Tax Assets Deferred Tax Liabilities Assets /(Liabilities) Deferred tax on temporary diff erences on following items Loans and Advances to BFIs - - - Loans and Advances to Customers - (20,016,215) (20,016,215) Assets held for Sale (943,018) (943,018) Investment Properties - - - Investment Securities 5,016,914 - 5,016,914 Investment In Associates - - - Property and Equipment (17,063,720) (17,063,720) Employees' Defi ned Benefi t Plan 12,574,891 - 12,574,891 Employees' Leave Liability 11,494,554 - 11,494,554 Lease Liabilities 3,561,133 - 3,561,133 Provisions LLP - - - Other Temporary Diff erences - - Deferred tax on temporary diff erences 15,583,773 (20,959,232) (5,375,460) Deferred tax on carry forward of unused tax losses - - - Deferred tax due to changes in tax rate - - - Net Deferred Tax Asset (Liabilities) as on year end of (5,375,460) 2074/75 Deferred Tax (Asset)/ Liabilities as on Shrawan 01, 2074 39,780,834 Origination/(Reversal) during the year 34,405,374

Deferred Tax (expense)/income recognized in proﬁ t or loss (4,452,178) Deferred Tax (expense)/income recognized in Other 38,857,552 Comprehensive Income Deferred Tax (expense)/income recognized directly in equity -

NMB Annual Report-2018/19 183 Notes to Financial Statements For the year ended 31 Ashad 2076

2075-76 Particulars Net Deferred Tax Deferred Tax Assets Deferred Tax Liabilities Assets /(Liabilities) Deferred tax on temporary diff erences on following items Loans and Advances to BFIs - - - Loans and Advances to Customers - - - Assets held for Sale - - - Investment Properties - - - Investment Securities - 7,737,685 7,737,685 Investment In Associates - - - Property and Equipment 5,372,537 5,372,537 Employees' Defi ned Benefi t Plan - - - Employees' Leave Liability - - - Lease Liabilities 4,963,259 - 4,963,259 Provisions LLP - - - Other Temporary Diff erences - - - Deferred tax on temporary diff erences 10,335,796 7,737,685 18,073,481 Deferred tax on carry forward of unused tax losses - - - Deferred tax due to changes in tax rate - - - Net Deferred Tax Asset (Liabilities) as on year end of - - 18,073,481 2075/76 Deferred Tax (Asset)/ Liabilities as on Shrawan 01, 2075 - - 5,375,460 Origination/(Reversal) during the year 23,448,941

Deferred Tax (expense)/income recognized in proﬁ t or loss 20,728,170 Deferred Tax (expense)/income recognized in Other 2,720,771 Comprehensive Income Deferred Tax (expense)/income recognized directly in equity -

Other Assets 4.16

Particulars 2075-76 2074-75 2073-74 Assets held for Sale 571,506 3,143,393 - Other Non-Banking Assets - - - Bills Receivable - - - Accounts Receivable 2,191,266 38,159 4,669,005 Accrued Income - - - Prepayments and Deposits 23,408,322 14,105,540 1,370,982 Income Tax Deposit - - - Deferred Employee Expenditure 1,789,591 2,342,600 4,167,069 Cash In Transit 905,600 905,600 905,600 Other 27,681,646 27,015,950 31,495,296 - Stationery Stock 3,908,490 4,439,026 1,483,922 - Commission Receivable - - - - Deposit - - - - Dividend Tax Paid in Advance - - - - Remittance Receivable 17,802,531 18,937,098 23,427,982 - Others 5,970,625 3,639,826 6,583,392 Grand Total 56,547,931 47,551,242 42,607,951

184 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

Due to Bank and Financial Institutions 4.17

Particulars 2075-76 2074-75 2073-74

Money Market Deposits - - Interbank Borrowing 250,000,000 - - Other Deposits from BFIs 1,246,132,384 599,112,852 614,140,643 Settlement and Clearing Accounts - - - Other Deposits from BFIs - Total 1,496,132,384 599,112,852 614,140,643

Due to Nepal Rastra Bank 4.18

Particulars 2075-76 2074-75 2073-74

Reﬁ nance from NRB - - - Standing Liquidity Facility - - - Lender of Last Resort facility from NRB - - - Securities sold under repurchase agreements - - - Other Payable to NRB - - - Total - - -

Derivative Financial instruments 4.19

Particulars 2075-76 2074-75 2073-74

Held for Trading Interest Rate Swap - - - Currency Swap - - - Forward Exchange Contracts Others Held for Risk Management Interest Rate Swap Currency Swap Forward Exchange Contracts. Others - - - Total - - -

NMB Annual Report-2018/19 185 Notes to Financial Statements For the year ended 31 Ashad 2076

Deposits from customers 4.20

Particulars 2075-76 2074-75 2073-74

Institutions Customers: 6,444,253,815 5,100,346,810 3,230,823,078 Term deposits 2,901,912,512 2,170,115,941 1,328,503,665 Call deposits 3,125,193,680 2,519,934,309 1,618,364,670 Current deposits 144,850,520 143,101,347 100,673,204 Other 272,297,103 267,195,213 183,281,539 Individual Customers: 17,708,762,716 15,755,731,706 12,216,465,500 Term deposits 9,887,407,322 8,275,476,631 6,504,643,6069 Saving deposits 7,704,225,496 7,345,909,475 5,612,957,3709 Current deposits 117,113,778 133,993,699 79,728,7949 Other 16,120 351,901 19,135,729 Total 24,153,016,531 20,856,078,516 15,447,288,578

4.20.1 Currency wise analysis of deposit from customers

Particulars 2075-76 2074-75 2073-74

Nepalese Rupee 24,153,016,531 20,856,078,516 15,447,288,578 Indian Rupee - - - United State dollar - - - Great Britain pound - - - Euro - - - Japenese yen - - - Chinese Yuan - - - Other - - - Total 24,153,016,531 20,856,078,516 15,447,288,578

Borrowings 4.21

Particulars 2075-76 2074-75 2073-74

Domestic Borrowing - - - Nepal Government - - - Other Institutions - - - Other - - - Sub total - - - Foreign Borrowing - - - Foreign Bank and Financial Institutions - - - Multilateral Development Banks - - - Other institutions - - - Sub total - - - Total - - -

186 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

Provisions 4.22

Particulars 2075-76 2074-75 2073-74

Provisions for redundancy - - - Provision for restructuring - - - Pending legal issues and tax litigation - - - Onerous contracts - - - Other - - - Total - - -

4.22.1 Movement in Provisions

Particulars 2075-76 2074-75 2073-74

Balance at Shrawan 1 - - - Provisions made during the year - - - Provisions used during the year - - - Provisions reversed during the year - - - Unwind of discount - - - Balance at Ashad end - - -

Other Liabilities 4.23

Particulars 2075-76 2074-75 2073-74

Liabilities for emloyees defi ned benefi t obligations - 41,916,304 29,165,251 Liabilities for leave - 38,315,180 25,690,008 Short term employee benefi ts 767,925 1,123,815 769,049 Bills payable 674,863 760,168 3,071,447 Creditors and accruals 4,324,815 5,589,220 5,692,503 Interest payable on deposits 120,814,734 130,151,695 72,046,827 Interest payable on borrowing - - - Liabilities on defered grant income - - - Unpaid Dividend 1,050,791 1,058,557 1,060,718 Liabilities under Finance Lease 16,544,197 11,870,443 7,347,048 Employee bonus payable 88,143,358 59,311,290 62,269,166 Other Liabilities 124,199,239 63,014,290 94,180,476 - Audit Fee Payable 1,596,088 1,130,000 678,000 - TDS Payable 41,345,064 30,775,638 22,615,226 - Social Welfare Fund 37,041,610 6,075,867 15,237,820 - Amount Received for Earthquake Relief 30,350,000 15,300,599 45,800,000 - Others 13,866,477 9,732,186 9,849,430 Total 356,519,924 353,110,962 301,292,494

NMB Annual Report-2018/19 187 Notes to Financial Statements For the year ended 31 Ashad 2076

4.23.1. Defi ned Benefi t Obligation The amounts recognised in the statements of fi nancials positions are as follows :

Particulars 2075-76 2074-75 2073-74

Present value of unfunded obligations 53,782,097 41,916,304 29,165,251 Present value of funded obligations - - - Total present value of obligations 53,782,097 41,916,304 29,165,251 Fair value of plan assets 53,782,097 - - Present value of net obligations - 41,916,304 29,165,251 Recognised liability for deﬁ ned beneﬁ t obligations - 41,916,304 29,165,251

4.23.2: Plan Assets Plan assets comprise

Particulars 2075-76 2074-75 2073-74

Equity securities - - - Government bonds - - - Bank deposit - - - Other 53,782,097 - - Total 53,782,097 - -

4.23.3: Movement in the present value of deﬁ ned beneﬁ t obligations

Particulars 2075-76 2074-75 2073-74

Defi ned benefi t obligations at Shrawan 1 41,916,304 29,165,251 16,155,096 Actuarial losses - - - Benefi ts paid by the plan - (1,049,347) - Benefi t directly paid by bank (2,592,113) Current service costs; Past Service Cost and interest 14,457,906 13,800,400 13,010,155 Defi ned benefi t obligations at Ashad end 53,782,097 41,916,304 29,165,251

4.23.4: Movement in the fair value of plan assets

Particulars 2075-76 2074-75 2073-74

Fair value of plan assets at Shrawan 1 - - Contributions paid into the plan 53,782,097 1,049,347 - Beneﬁ ts paid during the year - (1,049,347) - Actuarial (losses) gains - - - Expected return on plan assets - - - Fair value of plan assets at Ashad end 53,782,097 - -

188 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

4.23.5: Amount recognised in proﬁ t or loss

Particulars 2075/76 2074/75 2073/74

Current service costs 14,457,906 13,800,400 13,010,155 Past service costs-(non Vested) - - - Past service costs (Vested) - - - Interest on obligation - - - Expected return on plan assets - - - Total 14,457,906 13,800,400 13,010,155

4.23.6: Amount recognised in other comprehensive income

Particulars 2075/76 2074/75 2073/74

Acturial (gain)/loss - - - Total - - -

4.23.7: Actuarial assumptions

Particulars 2075/76 2074/75 2073/74

Discount rate Expected return on plan asset Future salary increase Withdrawal rate - - -

Debt secutities issued 4.24

Particulars 2075-76 2074-75 2073-74

Debt securities issued designated as at fair value through - - - proﬁ t or loss Debt securities issued at amortised cost - - - Total - - -

Subordinate Liabilities 4.25

Particulars 2075-76 2074-75 2073-74

Redeemable preference shares - - - Irredemable cumulative preference shares (liabilities component) Other Total - - -

NMB Annual Report-2018/19 189 Notes to Financial Statements For the year ended 31 Ashad 2076

Share Capital 4.26

Particulars 2075-76 2074-75 2073-74

Ordinary Shares 2,515,235,600 2,515,235,600 1,643,944,800 Convertible Preference Shares (Equity component) - - - Irredemable Preference Shares (Equity component) - - - Perpetual debt (Equity component only) - - - Calls in Advance - - 234,752,187 Total 2,515,235,600 2,515,235,600 1,878,696,987

4.26.1 Share capital detail

Particulars 2075-76 2074-75 2073-74

Authorised capital 30,000,000 Ordinary Share of Rs. 100 each 3,000,000,000 3,000,000,000 3,000,000,000 Issued Capital 16,439,448 Ordinary Share of Rs. 100 each (FY 2073-74) 1,643,944,800 25,152,356 Ordinary Share of Rs. 100 each(FY 2074-75) 2,515,235,600 25,152,356 Ordinary Share of Rs. 100 each(FY 2075-76) 2,515,235,600 Suscribed and paid up capital 16,439,448 Ordinary Share of Rs. 100 each (FY 2073-74) 1,643,944,800 25,152,356 Ordinary Share of Rs. 100 each(FY 2074-75) 2,515,235,600 25,152,356 Ordinary Share of Rs. 100 each(FY 2075-76) 2,515,235,600 Total 2,515,235,600 2,515,235,600 1,643,944,800

4.26.2 Ordinary Share Ownership 2075-76 2074-75 2073-74 Particulars % of holding Amount % of holding Amount % of holding Amount

Domestic ownership 100.00% 25,152,356.00 100.00% 25,152,356 100.00% 1,643,944,800 Nepal Government "A" Class licenced institutions Other Licenced institutions Other institutions & individuals Public 49.00% 12,324,641 49.00% 12,324,641 49.00% 805,532,952 Other 51.00% 12,827,715 51.00% 12,827,715 51.00% 838,411,848 Foreign Ownership Total 100.00% 25,152,356 100.00% 25,152,356 100.00% 1,643,944,800

190 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

Reserves 4.27

Particulars 2075-76 2074-75 2073-74

Statutory general reserve 543,946,962 436,857,410 362,106,410 Exchange equilisation reserve 27,461 27,461 1,284 Corporate social responsibility Fund 7,318,175 5,198,837 3,943,935 Capital redemption reserve Regulatory reserve 226,144,947 - - Investment adjustment reserve 1,500,000 2,521,463 759,923 Capital reserve Assets revaluation reserve - - - Fair value reserve (18,054,599) (11,706,133) 78,961,488 Dividend equalisation reserve Actuarial gain - - - Special reserve Deferred Tax Reserve - 34,608,911 15,794,522 Staﬀ Training Reserve 1,272,835 897,276 592,843 Other reserve Total 762,155,780 468,405,224 462,160,406 Regulatory reserve includes the amount that is allocated from proﬁ t or retained earnings fo the bank as per directive of NRB for the purpose of implementation of NFRS and which shall not be regarded as free for distribution of dividend (cash as well as bonus shares). The amount allocated to this reserve includes the following adjustments as per NFRS:

Particulars As at 31 Ashad 2076

Accrued Interest on Loans and Advances recognized as Income 176,451,580 Provision of Non - Banking Assets 571,506 Deferred Tax Assets 18,073,481 Fair value adjustment of Equity Shares 31,048,379 Total 226,144,947

Besides, movement in Corporate Social Responsibility Fund and staﬀ Training Reserve are given below:

Corporate Social Responsibility Fund 2075-76 NPR

A. Net proﬁ t for FY 2075/76 535,447,757 B. 1% of net proﬁ t appropriated to CSR fund 5,354,478 C. Opening CSR fund 5,198,837 D. CSR expense incurred for FY 2075/76 3,235,139 E. Closing CSR Reserve FY 2075/76 (B+C-D) 7,318,175 F. Net Movement (E-C) 2,119,338

Staﬀ Training Reserve 2075-76 NPR

A. Staff Expenses of FY 2074/75 186,552,805 B. 3% of the above to be expensed in FY 2075/76 5,596,584 C. Training Expenses for FY 2075/76 5,221,026 D. Excess/(Shortfall) (C-B) (375,558) E. Opening Staff Training Reserve 897,276 F. Closing Staff Training Reserve 1,272,835

NMB Annual Report-2018/19 191 Notes to Financial Statements For the year ended 31 Ashad 2076

Contingent liabilities and commitments 4.28

Particulars 2075-76 2074-75 2073-74

Contingent liabilities 94,550,026 46,011,526 27,876,678 Undrawn and undisbursed facilities 311,450,115 499,643,200 497,681,830 Capital commitment - - - Lease Commitment - - - Litigation 5,043,705 5,043,705 5,043,705 Total 411,043,846 550,698,431 530,602,213

4.28.1: Contingent Liabilities

Particulars 2075-76 2074-75 2073-74

Acceptance and documentary credit - - - Bills for collection - - - Forward exchange contracts - - - Guarantees 94,550,026 46,011,526 27,876,678 Underwriting commitment - - - Other commitments - - - Total 94,550,026 46,011,526 27,876,678

4.28.2: Undrawn and undisbursed facilities

Particulars 2075-76 2074-75 2073-74

Undisbursed amount of loans - - - Undrawn limits of overdraﬅ s 311,450,115 499,643,200 497,681,830 Undrawn limits of credit cards - - - Undrawn limits of letter of credit - - - Undrawn limits of guarantee - - - Total 311,450,115 499,643,200 497,681,830

192 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

4.28.3: Capital commitments Capital expenditure approved by relevant authority of the bank but provision has not been made in ﬁ nancial statements

Particulars 2075-76 2074-75 2073-74

Capital commitments in relation to Property and Equipment - - - Approved and contracted for - - - Approved but not contracted for - - - Sub total - - - Capital commitments in relation to Intangible assets - - - Approved and contracted for - - - Approved but not contracted for - - - Sub total - - - Total - - -

4.28.4: Lease commitments

Particulars 2075-76 2074-75 2073-74

Operating lease commitments "Future minimum lease payments under non cancellable - - - operating lease, where the bank is lessee" Not later than 1 year - - - Later than 1 year but not later than 5 years - - - Later than 5 years - - - Sub total - - -

Finance lease commitments - - - Future minimum lease payments under non cancellable operating lease, where the bank is lessee Not later than 1 year - - - Later than 1 year but not later than 5 years - - - Later than 5 years - - - Sub total - - - Grand total - - -

NMB Annual Report-2018/19 193 Notes to Financial Statements For the year ended 31 Ashad 2076

4.28.5: Litigation

Particulars 2075-76 2074-75 2073-74

Contingent Tax Liabilities(Income Tax) 5,043,705 5,043,705 5,043,705

Interest Income 4.29

Particulars 2075-76 2074-75

Cash and cash equivalent 234,786,693 170,578,215 Due from Nepal Rastra Bank Placement with bank and fi nancial institutions - - Loan and advances to bank and fi nancial institutions 45,589,623 3,898,614 Loans and advances to customers 3,004,690,589 2,233,136,151 Investment securities 27,432,663 27,586,007 Loan and advances to staff 1,157,915 1,060,011 Other Interest Income Total interest income 3,313,657,484 2,436,258,999

Interest Expense 4.30

Particulars 2075-76 2074-75

Due to bank and ﬁ nancial institutions 242,447,005 137,513,121 Due to Nepal Rastra Bank 7,762,959 3,892,337 Deposits from customers 1,837,714,064 1,421,989,570 Borrowing - - Debt securities issued - - Subordinated liabilities - - Other Charges - - Total Interest expense 2,087,924,029 1,563,395,029

194 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

Fees and commission income 4.31

Particulars 2075-76 2074-75

Loan administration fees - - Service fees 166,552,077 129,471,699 Consortium fees Commitment fees DD/TT/Swiﬅ fees - - Credit card/ATM issuance and renewal fees 26,202,921 17,585,344 Renewal fees Prepayment and swap fees Investment banking fees Asset management fees Brokerage fees Remittance fees 9,043,811 11,219,321 Commission on letter of credit - - Commission on guarantee contracts issued - - Commission on share underwriting/issue Locker rental 608,625 678,425 Other fees and commision income - 14,933,718 Total Fees and Commission Income 202,407,434 173,888,506

Fees and commission Expense 4.32

Particulars 2075-76 2074-75

ATM management fees 8,077,098 2,501,364 VISA/Master card fees Guarantee commission Brokerage DD/TT/Swiﬅ fees. Remittance fees and commission 37,244 42,722 Other fees and commission expense 100,145 233,585 Other commission and Fees 100,145 233,585 CIC Fees - - Deposit Premium - - Other Charges Total Fees and Commission Expense 8,214,487 2,777,672

Net Trading Income 4.33

Particulars 2075-76 2074-75

Changes in fair value of trading assets - - Gain/loss on disposal of trading assets - - Interest income on trading assets - - Dividend income on trading assets - - Gain/loss foreign exchange transation 3,735,696 127,734 Other - - Net Trading Income 3,735,696 127,734

NMB Annual Report-2018/19 195 Notes to Financial Statements For the year ended 31 Ashad 2076

Other Operating Income 4.34

Particulars 2075-76 2074-75 Foreign exchange revauation gain (3,719,677) 104,709 Gain/loss on sale of investment securities - - Fair value gain/loss on investment properties Dividend on equity instruments 4,740,551 9,019,825 Gain/loss on sale of property and equipment 12,235 60,488 Gain/loss on sale of investment property Operating lease income Gain/loss on sale of gold and silver Other Operating Income Share of Income of Associates - - Total 1,033,110 9,185,022

Impairment charge/(reversal) for loan and other losses 4.35

Particulars 2075-76 2074-75 Impairment charge/(reversal) on loan and advances to BFIs 4,497,596 900,000 Impairment charge/(reversal) on loan and advances to customers 177,707,937 45,999,435 Impairment charge/(reversal) on ﬁ nancial Investment - - Impairment charge/(reversal) on placement with BFIs Impairment charge/(reversal) on property and equipment Impairment charge/(reversal) on goodwill and intangible assets Impairment charge/(reversal) on investment properties - - Impairment charge/(reversal) on Other Assets - - Total 182,205,533 46,899,435

Personal Expenses 4.36

Particulars 2075-76 2074-75 Salary 104,175,966 85,129,194 Allowances 74,256,633 50,381,103 Gratuity Expense 14,457,906 13,800,400 Provident Fund 8,176,230 6,850,668 Uniform 4,359,929 4,165,216 Training & development expense 5,221,026 3,198,370 Leave encashment 12,534,908 18,962,958 Medical - - Insurance 1,970,955 1,366,473 Employees incentive 2,060,753 2,698,424 Cash-settled share-based payments - - Pension expense - - Finance expense under NFRS 1,157,915 1,060,011 Other expenses related to staﬀ - - Subtotal 228,372,223 187,612,817 Employees bonus 80,020,661 59,311,290 Grand Total 308,392,884 246,924,107

196 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

Other Operating Expenses 4.37

Particulars 2075-76 2074-75 Directors' fee 714,500 536,000 Directors' expense 159,044 172,078 Auditors' remuneration 4,214,075 2,293,900 Other audit related expense 873,973 892,855 Professional and legal expense 137,000 149,360 Oﬃ ce administration expense (4.37 A) 55,168,646 59,411,631 Operating Lease expense (4.37 B) 86,068,216 66,366,921 Operating expense of investment properties - - Corporate social responsibility expense 3,255,039 2,522,504 Onerous lease provisions - - Other Expenses 5,903,643 4,620,876 Repair & Maintenance Building 168,311 192,573 Repair & Maintenance Vehicle 1,175,829 983,866 Repair & Maintenance Others 2,960,992 1,985,818 Repair & Maint. Oﬃ ce Equipment & Furniture 1,174,473 779,267 Share Issue Expenses 306,963 406,456 Director's Education Program 117,075 272,897 Techinical Fees - - Total 156,494,137 136,966,125

Oﬃ ce Administration Expenses 4.37 A

Particulars 2075-76 2074-75 Insurance 12,083,045 12,308,291 Postage, Telephone, 3,983,614 3,816,205 Printing & Stationery 7,537,994 11,234,584 Newspaper & Periodicals 443,030 260,700 Advertisements 7,351,695 7,341,673 Travelling Expenses 1,487,608 1,932,786 Fuel Expenses 3,620,899 3,179,282 Entertainment 2,830,472 2,216,880 AGM Expenses - 914,616 Annual Fee 93,464 43,042 Oﬃ ce Expenses 940,417 5,017,520 Oﬃ ce Inaugration Expenses 17,500 2,832,431 Clearing Expenses 852,262 854,467 Goods Carriage Expenses 303,360 1,006,663 Merger Expenses 1,439,429 - Other Committee Meeting Allowance 541,169 119,054 Registration Charges 4,355,257 1,846,191 Internet & Cable Expenses 4,726,887 4,487,246 Miscelleneous Expenses 2,560,544 - Total 55,168,646 59,411,631

NMB Annual Report-2018/19 197 Notes to Financial Statements For the year ended 31 Ashad 2076

Operating Lease Expenses 4.37 B

Particulars 2075-76 2074-75

House Rent Expenses 44,047,442 37,794,004 Electricity Expenses 9,323,715 6,937,302 Security Expenses 32,697,059 21,635,616 Total 86,068,216 66,366,921

Depreciation and Amortisation 4.38

Particulars 2075-76 2074-75

Depreciation on property and equipment 41,368,619 35,386,492 Depreciation on investment property - - Amortisation of intangible assets 16,068,079 9,902,832 Total 57,436,698 45,289,324

Non Operating Income 4.39

Particulars 2075-76 2074-75

Recovery of Loan written oﬀ - - Other Income 19,993 12,400 Total 19,993 12,400

Non Operating expense 4.40

Particulars 2075-76 2074-75

Loan written oﬀ - - Redundancy provision Expense of restructuring Other expense. Total - -

198 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

Income Tax Expenses 4.41

Particulars 2075-76 2074-75

Current Tax Expenses 205,466,362 178,440,863 Current Year 205,466,362 179,648,311 Adjustment for Prior Years - (1,207,448) Deferred tax Expenses (20,728,170) 4,452,178 Origination and Reversal of Temporary Diﬀ erences (20,728,170) 4,452,178 Change in tax Rate Recognition of Previously unrecognized Tax Losses - - Total Income tax expense 184,738,192 182,893,041

4.41.1: Reconciliation of Tax Expenses and Accounting Proﬁ t

Particulars 2075-76 2074-75

Profi t Before Tax 720,185,949 577,220,969 Tax Amount at the Rate of 30% 216,055,785 173,166,291 Add: Tax Eff ect of the expenses that are not deductible for tax purpose 2,429,074 20,219,555 Less: Tax Eff ect on Exempt Income (504,365) (291,588) Add/Less: Tax Eff ect on other Items (12,514,133) (14,653,395) Total Income Tax Expenses 205,466,362 178,440,863 Eff ective Tax Rate 28.53% 30.91%

NMB Annual Report-2018/19 199 Unaudited Financial Results (Quarterly) Fourth Quarter ended of Fiscal Year 2018-19 (FY 2075/2076)

Rs. in '000'

Condensed Statement of Financial Position Immediate Previous Year This Quarter Ending Ending Assets Cash and cash equivalent 4,573,598 4,606,755 Due from Nepal Rastra Bank 1,148,398 1,122,470 Placement with Bank and Financial Institutions - - Derivative ﬁ nancial instruments - - Other trading assets - - Loan and advances to B/FIs - - Loans and advances to customers 23,019,777 18,311,162 Investment securities 942,961 854,763 Current tax assets 23,466 - Investment in susidiaries - - Investment in associates - - Investment property - - Property and equipment 184,188 211,159 Goodwill and Intangible assets 4,385 6,213 Deferred tax assets 1,125 - Other assets 91,154 47,551 Total Assets 29,989,050 25,160,073 Liabilities Due to Bank and Financial Instituions 3,460,358 599,113 Due to Nepal Rastra Bank - - Derivative ﬁ nancial instruments - - Deposits from customers 21,938,791 20,856,079 Borrowing 250,000 - Current Tax Liabilities - 13,522 Provisions - - Deferred tax liabilities - 7,696 Other liabilities 400,349 353,111 Debt securities issued - - Subordinated Liabilities - - Total liabilities 26,049,498 21,829,521 Equity - - Share capital 2,515,236 2,515,236 Share premium 28,615 28,615 Retained earnings 712,297 256,830 Reserves 683,405 529,872 Total equity attributable to equity holders 3,939,552 3,330,552 Non-controlling interest - - Total equity 3,939,552 3,330,552 Total liabilities and equity 29,989,050 25,160,073

200 www.nmbbanknepal.com Unaudited Financial Results (Quarterly) Fourth Quarter ended of Fiscal Year 2018-19 (FY 2075/2076)

Rs. in '000'

Up to Corrosponding Condensed Statement of Proﬁ t or Loss Up to this Quarter Previous Year Quarter

Interest income 3,313,114 2,436,887 Interest expense (2,087,924) (1,563,395) Net interest income 1,225,190 873,492 Fees and Commission Income 203,942 173,889 Fees and commission expense 8,214 2,778 Net fee and commission income 195,728 171,111 Net interest, fee and commission income 1,420,918 1,044,603 Net trading income 3,736 128 Other operating income 1,033 9,185 Total operating income 1,425,687 1,053,916 Impairment charge/(reversal) for loans and other losses 98,315 46,899 Net operating income 1,327,372 1,007,016 Operating expense - - Personnel expenses 316,879 246,924 Other operating expenses 156,494 136,966 Depreciation & Amortisation 57,437 45,289 Operating Profi t 796,562 577,837 Non operating income 10 12 Non operating expense - - Profi t before income tax 796,572 577,849 Income tax expense 197,035 183,081 Current Tax 210,439 178,441 Deferred Tax expense/(Income) (13,404) 4,641 Profi t for the period 599,537 394,768

Condensed Consolidated Statement of Comprehensive Income Proﬁ t/Loss for the period 599,537 394,768 Other Comprehensive lncome 10,695 (90,614) Total Comprehensive lncome 610,232 304,154

Statement showing Net Profi t a er Regulatory Adjustments: Net Profi t for the period ended 31 Asadh 2076 599,537 Profi t required to be appropriated to statutory reserve (134,479) Profi t required to be transfer to Regulatory Reserve (7,681) Net Profi t for the period ended 31 Asar 2076 available for distribution 457,377

NMB Annual Report-2018/19 201 Unaudited Financial Results (Quarterly) Fourth Quarter ended of Fiscal Year 2018-19 (FY 2075/2076)

Upto This Quarter Up to Corrosponding Ratios (YTD) Previous Year Quarter Capital fund to RWA 15.47% 18.55% Non performing loan (NPL) to toal loan 0.64% 0.52% Total loan loss provision to Total NPL 245.39% 240.14% Cost of Funds (YTD) 8.96% 9.41% CCD Ratio 78.75% 74.13% Base Rate 11.19% 12.62% Average Interest Spread (Calculated as per NRB Directives)- Last Month of Quarter 4.93% 4.97%

202 www.nmbbanknepal.com Reasons for Variance Due to above reasons Due to above Revision of contingent liabilities Due to appropriations Mainly due to additional impairment Audit and NFRS adjustments Reclassifi cation of short term borrowings Reclassifi Reclassifi cation of deposit from BFI's cation of deposit from Reclassifi Reclassifi cation of deposit from BFI's and short term borrowing cation of deposit from Reclassifi Audit and NFRS adjustments Audit and NFRS adjustments Tax calculation as per NFRS profi t calculation as per NFRS profi Tax Revision of fair value securities Reclassifi cation of Loans and Advances, increase in LLP and derecognition of AIR bad loan in LLP and derecognition cation of Loans and Advances, increase Reclassifi Reclassifi cation of Loans and Advances to MFI's Reclassifi ------0 2 0 2 3 - 0 2 0 43 23 11 57 38 23 -10 -15 100 -100 -1507 % 43,829,170 (Rounded off ) (Rounded off ------5 Variance 3.37 84,636,700 43,829,170 34,606,327 23,163,460 (3,437,757) 84,636,700 305,871,866 43,829,170 163,387,165 250,000,000 659,171,193 (78,750,466) (16,948,873) In Amount 128,465,870 128,465,870 (568,088,484) 1,964,225,971 (2,214,225,971) ------153.26 4,384,560 As per 28,614,713 56,547,931 18,073,481 26,903,428 411,043,846 762,155,780 548,909,519 356,519,924 184,187,635 919,797,104 568,088,484 Audited 31 Ashad 2076 3,854,915,611 2,515,235,600 1,496,132,384 4,573,597,783 1,148,397,928 3,854,915,611 29,860,584,450 26,005,668,839 29,860,584,450 24,153,016,531 22,360,606,116 ------156.63 4,384,560 1,124,608 As per 28,614,713 91,154,258 23,465,670 716,915,712 683,405,314 712,296,684 400,349,094 250,000,000 184,187,640 942,960,565 Ashad 2076 3,939,552,310 2,515,235,600 3,460,358,355 4,573,597,783 1,148,397,928 Unaudited 31 3,939,552,310 29,989,050,320 26,049,498,010 29,989,050,320 21,938,790,561 23,019,777,309 Net assets value per share Contingent liabilities and commitment Total liabilities and equity Total Total equity Total Non-controlling Non-controlling interests Total equity attributable to holders Total Reserves Equity Capital Share Subordinated Liabilities Subordinated liabilities Total Premium Share Debt securities issued Retained Earning Provisions tax liabilities Deferred Other liabilities Current Tax Liabilities Tax Current Borrowings Due to Nepal Rastra Bank Due to Nepal Rastra Derivative Financial instruments Financial Derivative customers Deposit from Total Assets Total Liabilities Institutions Due to Bank and Financial Other assets Investment in Associates Investment property Investment and equipment Property Goodwill and Intangible Assets tax assets Deferred Investment in subsidiaries Investment Current Tax Assets Tax Current Investment in securities Investment Particulars Loans and advances to customers Assets Cash and cash equivalent Due from Nepal Rastra Bank Nepal Rastra Due from Placement with Bank and Financial Institutions Placement with Bank and Financial nancial instruments fi Derivative assets Other trading Loan and Advances to B/FIs Comparision of Statement of Financial Position As on 31st Ashad 2076 Comparision of Statement Financial

NMB Annual Report-2018/19 203 Reasons for Variance Due to above reasons Due to above Revision of fair value securities Audit and NFRS adjustments Audit and NFRS adjustments Audit Adjustment Audit Adjustment Audit Adjustment Audit Adjustment AIR of bad loan derecognised with retorspective eff ect eff with retorspective AIR of bad loan derecognised - - - - - 6 2 3 1 6 0 1 0 57 11 11 (0) (0) 11 11 10 10 (0) 138 159 (55) (85) 329 (110) % (Rounded off ) (Rounded off ------(6) Variance 64,089 260,984 196,815 (10,474) 991,864 991,864 (543,069) 7,324,009 4,972,690 8,486,263 1,534,933 (543,069) 1,534,933 64,089,185 12,296,699 64,089,185 64,089,185 76,385,884 76,396,358 84,882,615 (17,043,499) (83,890,751) In Amount (81,132,684) - - 19,993 535,448 196,483 (338,965) 1,033,110 3,735,696 8,214,487 As per 57,436,698 (6,348,465) Audited 2075-76 535,447,757 184,738,192 205,466,362 156,494,137 308,392,884 182,205,533 202,407,434 (20,728,170) 529,099,292 720,165,956 535,447,757 535,447,757 720,185,949 194,192,947 3,313,657,484 (2,087,924,029) 1,242,489,675 1,424,695,208 1,419,926,403 1,225,733,455 - - 9,519 599,537 457,377 (142,150) 1,033,110 3,735,696 8,214,487 As per 10,695,033 57,436,692 98,314,782 2075-76 599,536,943 197,034,891 210,439,052 156,494,137 316,879,147 203,942,367 (13,404,161) 610,231,976 796,562,314 Unaudited 599,536,943 599,536,943 796,571,833 195,727,880 3,313,114,415 (2,087,924,029) 1,327,372,290 1,425,687,072 1,420,918,267 1,225,190,387 Distributable Profi t (NPR in Thousand) Distributable Profi t or loss t/(loss) as per profi Net profi Total Comprehensive Income Comprehensive Total Add/Less: Regulatory adjustments as per NRB Directive adjustments er regulatory t/(loss) aﬅ Profi Other Comprehensive Income Other Comprehensive Profi t for the period Profi Profi t for the period Profi t attributable to: Profi Equity holders of the bank interest Non-controlling Deferred tax income Deferred Income tax expense tax Current Non operating expense Non operating income tax t before Profi Non operating income Non operating Depreciation and amortisation Depreciation t Profi Operating Other Operating Expenses Other Operating Net Operating income Net Operating expenses Operating Personal Expense Total operating income operating Total for loans and other losses Impairment charge/(reversal) Other Operating Income Other Operating Net fee and Commission income fee and commission income Net interest Net Trading Income Net Trading Fees and Commission Expense Net interest income Net interest Fees and Commission Income Particulars Interest Expense Interest Interest Income Interest Comparision of Statement of Profi t or Loss For the year ended 31 Ashad 2076 t or Loss For the year Comparision of Statement Profi

204 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

1. General Information NFRS conform, in all material respect, to International Financial Reporting Standards (IFRS) as issued by the Om Development Bank Limited, herein aﬅ er referred International Accounting Standards Board (IASB). to as “the Bank” or “ODBL” was established aﬅ er the merger of “City Development Bank Limited” with “Om 2.2 Reporting Period and Approval Finance Limited”. It was further merged with Manaslu Development Bank Limited on 2074/03/02. ODBL is of fi nancial statement incorporated under the Companies Act, 2063 having The Bank follows the Nepalese fi nancial year based registration number 1013/064-065 on 2064/04/15 on the Nepalese calendar. to engage in fi nancial business and obtained license of operation as national level “B” Class fi nancial The accompanied fi nancial statements have been institution from Nepal Rastra Bank on 2074/3/6 approved by the Board of Directors on its meeting held (License No: “Kha”/54/064/065). Permanent on 26 November 2019 and have been recommended Account Number was obtained on 2064/04/15 (PAN for adoption by shareholders in the Annual General No 302647707) from Inland Revenue Department. Meeting. The Registered offi ce of ODBL is situated at Gandaki Zone, Kaski District, Pokhara Metropolitan City Ward 2.3 Functional and Presentation no.4, Chipledhunga. currency ODBL has fi ﬅ y three (53) branches including head Financial statements are denominated in Nepalese offi ce. The Bank is providing banking services with Rupees, which is the functional and presentation 53 branches and 19 ATMs. The Bank is listed at the currency of the Bank. Nepal Stock Exchange, Kathmandu, Nepal. 2.4 Use of Estimates, assumption The Bank has now been acquired by NMB Bank Limited and joint operation has started from and judgments 2076/06/11. The Bank, under NFRS, is required to apply accounting policies to most appropriately suit its circumstances and operating environment. Further, 2. Basis of Preparation the Bank is required to make judgement in respect of items where the choice of specifi c policy, accounting 2.1 Statement of Compliance estimate or assumption to be followed could materially aff ect the fi nancial statements. Later on The fi nancial statements have been prepared in this may be determined that a diff erent choice could accordance with Nepal Financial Reporting Standards have been more appropriate. (NFRS) issued by the Accounting Standards Board of Nepal on 13th September 2013.

NMB Annual Report-2018/19 205 Notes to Financial Statements For the year ended 31 Ashad 2076

NFRS requires the Bank to make estimates and 2.6 New standards in issue but not assumptions that will aff ect the assets, liabilities, yet eff ective disclosure of contingent assets and liabilities, and profi t or loss as reported in the fi nancial statements. The standards and interpretations that are issued, but not yet eff ective, upto the date of issuance of the The Bank applies estimates in preparing and Bank’s fi nancial statements are disclosed below. The presenting the fi nancial statements. The estimates Bank intends to adopt these standards, if applicable, and underlying assumptions are reviewed when they become eff ective. periodically. Revision to accounting estimates are recognised in the period in which the estimates is  IFRS 9 – Financial Instruments revised, and are applied prospectively. IFRS 9 – Financial Instruments having expected credit Disclosures of the accounting estimates have been loss model has been issued and eff ective from 1st included in the relevant section of the notes wherever January 2018 internationally but is not yet pronounced the estimates have been applied along with the by The Institute of Chartered Accountants of Nepal nature and eff ect of changes of accounting estimates, (ICAN). For the reporting of fi nancial instruments, if any. NAS 32 Financial Instruments, Presentation, NAS 39 Financial Instruments Recognition and 2.5 Changes in Accounting policies Measurements and NFRS 7 Financial Instruments – Disclosures have been applied. The bank has adopted Nepal Financial Reporting Standard with certain ICAN Carve Outs as described A number of new standards and amendments to in Notes. The application year for change in policy is: the existing standards and interpretations have been issued by IASB aﬅ er the pronouncements of Relevant Financial Nepalese English NFRS with varying eff ective dates. Those become Statement Calendar Calendar applicable when ASB Nepal incorporates them within Opening NFRS SFP 1 Shrawan 2074 16 July 2017 NFRS. date

31 Ashad 2074 15 July 2017 Comparative SFP A signifi cant impact on classifi cation and and 32 Ashad and 16 July Date 2075 2018 measurement including impairment of fi nancial instruments, will arise as a result of application of 1 Shrawan Comparative 16 July 2017 - 2074- 32 Ashad IFRS 9. reporting period 16 July 2018 2075

First NFRS SFP 31 Ashad 2076 16 July 2019 2.7 New Standards and Date Interpretation not adopted 1 Shrawan First NFRS 17 July 2018- 2075- 31 Ashad reporting period 16 July 2019 Although IFRS 9 is applicable internationally from 1st 2076 of January 2018, it has not been applied as it is yet to be adopted by ICAN.

206 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

Further the Institute of Chartered Accountants of NAS 39: Financial Instruments: Recognition Nepal (ICAN) has provided carve out on various and Measurement-Impracticability to determine standards with diff erent time frame; some of which transaction cost of all previous years which is the are compulsory and others optional for banks and part of eff ective interest rate-Optional-up to FY fi nancial institutions. The list of carve-out and its 2018-19-TheBankhas utilized this carve out. compliance status while preparation of fi nancial statement of the bank is as given below; NAS 39 : Financial Instruments: Recognition and Measurement- Impracticability to determine interest NFRS 10 : Consolidated Financial Statements- income on amortized cost Optional-up to FY 2019- Preparation of consolidated fi nancial statement using 20-The Bank has utilized this carve out. uniform accounting policies is necessary unless it is impracticable to do so- Optional-up to FY 2019-20- 2.8 Discounting This carve out has no implication to the Bank as it does not have any subsidiaries. Discounting has been applied where assets and liabilities are non-current and the impact of the NAS 28 : Investments in Associates and Joint discounting is material. Ventures 2.9 Limitation of NFRS Accounting for Investment in Associates as per equity method using uniform accounting policies Optional- implementation up to FY 2019-20-Not applicable If the information is not available and the cost to develop would exceed the benefi t derived, such NAS 34 : Interim Financial Reporting exception to NFRS implementation has been noted and disclosed in respective section. Impracticable to restate the corresponding previous interim period information-Optional-up to FY 2018- 19-The Bank has utilized this carve out. 3. Signifi cant Accounting Policies The principal accounting policies applied in the NAS 39: Financial Instruments: Recognition and preparation of these fi nancial statements are set out Measurement- Incurred Loss Model to measure below. These policies have been consistently applied the Impairment Loss on Loan and Advances or to all the years presented, unless otherwise stated. impairment provision as per Nepal Rastra Bank (NRB) directive whichever is higher- compulsory- 3.1 Basis of Measurement up to FY 2019-20. The Bank loans and advances are greater as per NRB Directive as compared to NFRS. The fi nancial statements have been prepared on a Therefore, loans and advances are impaired as per historical cost basis, except for available –for-sale NRB Directive. investments, assets held for sale and discontinued

NMB Annual Report-2018/19 207 Notes to Financial Statements For the year ended 31 Ashad 2076

operations, other fi nancial assets and liabilities 3.4 Financial Assets and Financial held for trading and fi nancial assets and liabilities Liabilities designated at fair value through profi t or loss (FVTPL), all of which have been measured at fair value. 3.4.1 Recognition

The fi nancial statements have been prepared on a Financial assets and liabilities, with the exception of going concern basis where the accounting policies loans and advances to customers and balances due and judgements as required by the standards are to customers, are initially recognised on the trade consistently used and in case of deviations disclosed date i.e. the date that the Bank becomes a party to specifi cally. the contractual provisions of the instrument. This includes regular way trades: purchases or sales of However, the bank has merged with NMB Bank Ltd. fi nancial assets that require delivery of assets within and have started joint operation on 11 Ashwin 2076. the time frame generally established by regulation or convention in the market place. Loans and advances 3.2 Basis of Consolidation to customers are recognised when funds are transferred to the customers’ account at fair value The Bank does not have control over any other inclusive of transaction costs. The Bank recognises entity for consolidation of Financial Statements. due to customer balances when funds reach the Investments in Shares made by the Bank are fi nancial bank. investments and have been described under 4.8 in Notes. 3.4.2 Classifi cation

3.3 Cash and Cash Equivalent The Bank classifi es its fi nancial assets into the following measurement categories: The fair value of cash is the carrying amount. Cash and cash equivalent represent the amount of cash  Financial assets and liabilities held for trading in hand, balances with other bank and fi nancial institutions, money at short notice and highly liquid The Bank classifi es fi nancial assets or fi nancial fi nancial assets with original maturities of three liabilities as held for trading when they have been months or less from the acquisition date that are purchased or issued primarily for short term profi t subject to an insignifi cant risk of changes in their making through trading activities or form part of a value and used by the Bank in the management of portfolio of fi nancial instruments that are managed short-term commitment. together for which there is evidence of a recent pattern of short-term profi t taking. Included in this classifi cation are Government bonds, NRB Bonds, Domestic Corporate bonds, Treasury bills, Equities etc. held primarily for the trading purpose.

208 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

 Financial assets and fi nancial liabilities designated is almost nearer to the eff ective interest method at fair value through profi t or loss prescribed by NFRS. The method has been adopted as the cost for computation for interest on eff ective Financial assets and fi nancial liabilities classifi ed in interest method is huge in terms of benefi ts to be this category are those that have been designated by received from the computation in the short run. management upon initial recognition. Management may only designate an instrument at FVTPL upon  Held-to-maturity initial recognition when one of the following criteria are met, and designation is determined on an Held-to-maturity assets are non-derivative fi nancial instrument-by-instrument basis: assets with fi xed or determinable payments and fi xed maturities that the Bank’s management has the • The designation eliminates, or signifi cantly reduces, intention and ability to hold to maturity. the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or  Available-for-sale. recognising gains or losses on them on a diff erent basis Available-for-sale assets are those non-derivative fi nancial assets intended to be held for an indefi nite Or period of time, which may be sold in response to liquidity requirements or changes in interest rates, • The assets and liabilities are part of a group of exchange rates, commodity prices or equity prices. fi nancial assets, fi nancial liabilities, or both, which are managed, and their performance evaluated on a fair  Financial liabilities held at amortised cost value basis, in accordance with a documented risk management or investment strategy Financial liabilities not classifi ed held at fair value through profi t or loss includes borrowings which are Or classifi ed as amortised cost instruments.

• The fi nancial instrument contains one or more 3.4.3 Measurement embedded derivatives, unless they do not signifi cantly modify the cash fl ows that would otherwise be  Initial measurement required by the contract, or it is clear with little or no analysis when a similar instrument is fi rst considered All fi nancial instruments are initially recognised at that separation of the embedded derivative(s) is fair value plus transaction cost except in the case of prohibited. fi nancial assets and fi nancial liabilities recorded at fair value through profi t or loss.  Loans and receivables to Customers  Subsequent measurement Aﬅ er initial measurement, loans and advances to customers are subsequently measured at Financial assets and liabilities designated at fair value amortisation over the period of loan. This practice through profi t or loss are subsequently carried at fair

NMB Annual Report-2018/19 209 Notes to Financial Statements For the year ended 31 Ashad 2076

value, with gains and losses arising from changes 3.4.4 Derecognition in fair value taken directly to the statement of profi t Financial assets are derecognised when the rights or loss. Interest and dividend income or expense is to receive cash fl ows from the assets have expired recorded in revenue according to the terms of the or where the Bank has transferred substantially all contract, or when the right to payment has been risks and rewards of ownership. If substantially all established. the risks and rewards have been neither retained nor transferred and the Bank has retained control, the Available-for-sale fi nancial assets are subsequently assets continue to be recognised to the extent of the carried at fair value, with gains and losses arising from Bank’s continuing involvement. changes in fair value taken to Other Comprehensive Income. The Bank makes irrevocable election to route Financial liabilities are derecognised when the fair value changes through Other Comprehensive obligation under the liability is discharged, cancelled Income. Gain/Loss on equity instruments classifi ed or expires. Where an existing fi nancial liability as fair value through other comprehensive income is replaced by another from the same lender on is charged directly to equity and impact of re- substantially diff erent terms, or the terms of an measurement is shown in OCI. existing liability are substantially modifi ed, such an exchange or modifi cation is treated as a derecognition Loans and receivables and held-to-maturity fi nancial of the original liability and the recognition of a new assets are subsequently measured at amortised liability. The diff erence between the carrying value of cost. Within this category loans and advances to the the original fi nancial liability and the consideration customers have been recognised at amortised cost paid is recognised in profi t or loss. using the method that very closely approximates eff ective interest rate method. The losses arising 3.4.5 Determination of Fair Value from impairment of such investments are recognised in the income statement within credit loss expense. Fair value is the price that would be received to sell If the Bank were to sell or reclassify more than an an asset or paid to transfer a liability in an orderly insignifi cant amount of held-to-maturity investments transaction between market participants at the before maturity (other than in certain specifi c measurement date. The determination of fair value circumstances), the entire category would be tainted has been done as per the framework laid down in and would have to be reclassifi ed as available-for- NFRS 13 ‘Fair Value Measurement’. sale. 3.4.6 Valuation Hierarchy Financial liabilities are subsequently measured at amortised cost, with any diff erence between proceeds Assets and liabilities carried at fair value or for net of directly attributable transaction costs and the which fair values are disclosed have been classifi ed redemption value recognised in the statement of into three levels according to the observability of profi t or loss over the period of the borrowings using the signifi cant inputs used to determine the fair the eff ective interest method. values. Changes in the observability of signifi cant valuation inputs during the reporting period may

210 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

result in a transfer of assets and liabilities within and is based on Management’s best estimate of the fair value hierarchy. The determination of fair the present value of the future cash fl ows that are value has been done in accordance to NFRS 13 ‘Fair expected to be received. In estimating these cash Value Measurement. The Bank recognises transfers fl ows, Management makes judgments about a between levels of the fair value hierarchy when there borrower’s fi nancial situation and the net realisable is a signifi cant change in either its principal market or value of any underlying collateral. Each impaired the level of observability of the inputs to the valuation asset is assessed on its merits, and the workout techniques as at the end of the reporting period. strategy and estimate of cash fl ows considered recoverable. Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets for Individual assessment of impairment of exposures identical assets or liabilities. means establishing whether objective evidence of impairment exists, estimation of the present value Level 2 valuations are those with quoted prices for of future cash fl ows, and calculation of the value of similar instruments in active markets or quoted impairment for each individual receivable from the prices for identical or similar instruments in inactive borrower included in this assessment. markets and fi nancial instruments valued using models where all signifi cant inputs are observable. The bank has considered all loans and advances above NRs. 15 millions for individual assessment of Level 3 portfolios are those where at least one impairment. The bank determines, for each individual input, which could have a signifi cant eff ect on the loan to be assessed for individual impairment, instrument’s valuation, is not based on observable whether they expect to collect their receivables market data. from expected future cash fl ows (going concern) or from collateral realization (gone concern). If a bank 3.4.7 Impairment of Loans and Advances identifi es objective evidence of impairment, the bank indicates, at single debtor level, the most realistic The Bank reviews its individually signifi cant loans sources of repayment (collection approach/strategy) and advances at each Reporting date to assess based on all available information regarding such whether an impairment loss should be provided borrower’s fi nancial position and performances. The in the Statement of Profi t or loss. In particular, the bank assesses whether collection will be made from Management’s judgment is required in the estimation the borrower`s expected future operating cash fl ows of the amount and timing of future cash fl ows when (borrower continues to perform business activities determining the impairment loss. These estimates – going concern) or on the basis of collateral are based on assumptions about a number of factors enforcement and realization (expectation that the and hence actual results may diff er, resulting in future borrower ceases to exist – gone concern). In both changes to the provisions made. cases, bank uses conservative assumptions relating to the estimation of the expected cash fl ows, taking The individual impairment provision applies to into account current economic conditions and the fi nancial assets evaluated individually for impairment Bank’s own economic forecasts.

NMB Annual Report-2018/19 211 Notes to Financial Statements For the year ended 31 Ashad 2076

When estimating impairment based on collateral In assessing the need for collective impairment, realization, the recoverable amount is the present Management considers factors such as credit value of the net inﬂ ow from collateral realization quality (for example, loan to collateral ratio, level of (taking into account the priority of claims), discounted restructured performing loans), portfolio by applying the original eﬀ ective interest rate to the expected time to realization. Size, concentrations and economic factors.

A collective impairment provision is established for: To estimate the required allowance, assumptions are made to defi ne how inherent losses are modelled □ Groups of homogeneous loans and advances that and to determine the required input parameters, are not considered individually signifi cant; and based on historical experience and current economic conditions. The accuracy of the provision depends □ Groups of assets that are individually signifi cant on the model assumptions and parameters used in but that were not found to be individually impaired determining the collective provision.

The collective provision for groups of homogeneous As per the carve-out provided in NAS 39, the loans is established using statistical methods based bank shall measure impairment loss on loan and on historical loss rate experience, Loss Given Default advances as the higher of amount derived as per (LGD) and Probability of Default (PD) computed norms prescribed by Nepal Rastra Bank for loan loss using the statistical analysis of historical data on provision and amount determined as per paragraph delinquency to estimate the amount of loss for each 63 of NAS 39.As stated in 2.7 the bank loans and class of portfolio selected on the basis of its product, advances is greater considering the NRB directive risk factor, collateral coverage, exposure group etc. as compared to NFRS impairment provisioning. Management applies judgment to ensure that the Therefore, provisioning as per NRB directive is estimate of loss arrived at, on the basis of historical applied. information is appropriately adjusted to reﬂ ect the economic conditions and portfolio factors as at the Reporting date. The loss rates are regularly reviewed against actual loss experience.

212 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

Explanatory Notes

The impairment status as per para 63 of NAS 39 and as per NRB directive are as follows:

Provision as per NFRS Particulars 2074 2075 2076 Individual 38,085,741 32,239,966 44,347,145 Collective 10,139,150 15,565,066 14,598,380 Total NFRS Provision (A) 48,224,891 47,805,032 58,945,526

Provision as per NRB Particulars 2074 2075 2076 Good 134,591,597 173,625,533 215,008,369 Watch list 23,712,077 43,652,164 80,976,118 Restructured - 3,842,959 9,149,440 Substandard 18,888,021 14,940,871 24,014,474 Doubtful 9,039,988 4,988,638 15,008,294 Bad 32,976,580 25,057,533 104,156,535 Total NRB Provision (B) 219,208,262 266,107,697 448,313,230

Gap/(Excess) (A)-(B) (170,983,371) (218,302,665) (389,367,704)

3.4.8 Impairment of Non-Financial Assets 3.5 Trading Assets

The Bank assesses whether there are any indicators Trading assets are those assets that the bank of impairment for an asset or a cash generating unit acquires principally for the purpose of selling in (CGU) at each Reporting date or more frequently, if the near term or holds as part of a portfolio that is events or changes in circumstances necessitate to do managed together for short-term profi t shall be so. This requires the estimation of the ‘Value in use’ presented under this account head. The other trading of such individual assets or the CGUs. Estimating asset includes non-derivative fi nancial assets. It ‘Value in use’ requires the Management to make includes Government bonds, NRB Bonds, Domestic an estimate of the expected future cash fl ows from Corporate bonds, Treasury bills, Equities etc. held the asset or the CGU and also to select a suitable primarily for the trading purpose. discount rate in order to calculate the present value of the relevant cash fl ows. This valuation requires the Bank to make estimates about expected future cash fl ows and discount rates and hence, they are subject to uncertainty.

NMB Annual Report-2018/19 213 Notes to Financial Statements For the year ended 31 Ashad 2076

3.6 Derivatives Assets and allocate their cost to their residual values over their Derivative Liabilities estimated useful lives, as follows:

Derivative assets and liabilities (herein referred to as  Building 20 years instrument) is a contract whose value changes to the  Vehicle 5 Years change in agreed-upon underlying fi nancial asset/  Furniture(wooden) 5 Years liability which requires no initial net investment and is  Furniture(other) 10 Years settled at future date. Derivative instruments includes  Offi ce Equipment 5 Years transactions like interest rate swap, currency swap,  Computer Equipment 4 Years forward foreign exchange contract etc. held for trading  Other Assets 5 Years as well as risk management purposes. Derivative  Lease hold assets 10 Years fi nancial instruments are initially measured at fair value on the contract date and are subsequently re- The assets’ residual values and useful lives are measured to fair value at each reporting date. reviewed, and adjusted if appropriate, at each statement of fi nancial position date. The value of the Explanatory Notes assets fully depreciated but continued to be in use is considered not material. The details regarding the same is given in Schedule 4.4. However, the bank doesn’t have nor deals with At each reporting date, assets are also assessed for derivative fi nancial instruments. indicators of impairment. In the event that an asset’s carrying amount is determined to be greater than 3.7 Property and Equipment its recoverable amount, the asset is written down immediately to the recoverable amount. All property and equipment’s are stated at Historical cost. Cost includes expenditure that is directly Assets with costs less than NPR 10,000 are charged attributable to the acquisition of the assets. off on purchase as revenue expenditure.

Subsequent costs are included in the asset’s carrying Gains and losses on disposals are included in the amount or are recognised as a separate asset, as Statement of Profi t or Loss. appropriate, only when it is probable that future economic benefi ts associated with the item will fl ow 3.8 Intangible assets to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance are Acquired Intangible Assets charged to the statement of profi t or loss during the fi nancial period in which they are incurred. Intangible assets are initially measured at fair value, which refl ects market expectations of the probability Freehold land is not depreciated although it is subject that the future economic benefi ts embodied in the to impairment testing. Depreciation on other assets asset will fl ow to the Bank and are amortised on the is calculated using the straight- line method to basis of their expected useful lives.

214 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

Computer so ware Further land which is leased or held for capital appreciation motive is classifi ed as investment Acquired computer soﬅ ware licences are capitalised property. on the basis of the costs incurred to acquire and bring to use the specifi c soﬅ ware. Costs associated with Explanatory Notes the development of soﬅ ware are capitalised where it is probable that it will generate future economic The bank does not have any investment property. benefi ts in excess of its cost. Computer soﬅ ware costs are amortised over the period of 5 years in 3.10 Non-Current Assets held for Straight Line method (SLM). Costs associated with maintaining soﬅ ware are recognised as an expense Sale and Discontinued Operation as incurred. Non-banking assets of the bank which are expected to be sold within period of one year is classifi ed as At each reporting date, these assets are assessed for non-current assets held for sale. NBA is recognised indicators of impairment. In the event that an asset’s at a value lower of total receivable from customer or carrying amount is determined to be greater than fair value of property on the date of adoption. its recoverable amount, the asset is written down immediately. Explanatory Notes

3.9 Investment Property The details of non-current assets held for sale of the bank has been presented under Schedule 4.16. Land or Land and Building other than those classiﬁ ed as property and equipment and non-current 3.11 Income Tax assets held for sale under relevant accounting standard are presented under this account head. Investment properties are measured initially at its 3.11.1 Current tax cost. Transaction costs are included in the initial Current tax assets and liabilities for the current and measurement. Aﬅ er initial recognition, the Bank prior years are measured at the amount expected chooses the cost model to measure its investment to be recovered from, or paid to, the taxation properties in accordance with NAS 16. Non- authorities of Nepal. The tax rates and tax laws used Banking Assets which are not intended to be sold to compute the amount are those that are enacted, or within a period of next one year is also classiﬁ ed as substantively enacted, by the reporting date in Nepal. Investment Property. Non-banking assets taken over The liabilities recognised for the purpose of current the lower of Fair Value or Total amount due from Income tax, including fees, penalties are included customer as per guidelines issued by the Regulator under this head. is continued to be shown at the recorded value till the same is disposed.

NMB Annual Report-2018/19 215 Notes to Financial Statements For the year ended 31 Ashad 2076

3.11.2 Deferred Tax Assets/Liabilities 3.13 Provisions Deferred tax is provided in full, using the liability method, on temporary diff erences arising between Provisions are recognised in respect of present the tax bases of assets and liabilities and their obligations arising from past events where it is carrying amounts in the consolidated fi nancial probable that outfl ow of resources will be required statements Deferred income tax is determined using to settle the obligations and they can be reliably tax rate applicable to the Bank as at the reporting estimated. Provisions are reviewed at each reporting date which is expected to apply when the related date and adjusted to refl ect the best estimate deferred income tax asset is realised or the deferred income tax liability is settled. 3.14 Revenue Recognition

Deferred tax assets are recognised where it is Revenue is recognised to the extent that it is probable probable that future taxable profi t will be available that the economic benefi ts will fl ow to the Bank and against which the temporary diff erences can be the revenue can be reliably measured. The following utilised. specifi c recognition criteria must also be met before revenue is recognised. Deferred tax relating to items which are charged or credited directly to equity, is credited or charged 3.14.1 Interest Income directly to equity and is subsequently recognised in the statement of profi t or loss together with the Interest Income include interest income on loan deferred gain or loss. and advance, investment securities except on those investment securities measure at fair value through Explanatory Notes profi t or loss, cash and cash equivalent, due from Nepal Rastra Bank, due from BFIs, loan and advances The details of deferred tax and its working has been to staff etc. presented under Schedule 4.15. Interest income on loans and advances is recognized 3.12 Deposits, Debt securities issued on amortised principal which is nearer to the eff ective interest method suggested by NFRS. The adoption and subordinate Liabilities of eff ective interest method is not possible due to The deposits held by the bank on behalf of its constraints of time, eff ort and cost in short term customers are classifi ed as fi nancial liabilities and compared to the benefi ts it provides. Benefi t of carve- measured at amortised cost under eff ective interest out bas been applied to this eff ect. Interest of loans method. The bank does not have any debt securities and advances which are signifi cantly impaired are not issued and subordinated liabilities. recognized.

Explanatory Notes Interest income on government bond, treasury bills and bank balances are recognized under eﬀ ective The details of Deposits in given under Schedule interest method. 4.20. The bank does not have any debt securities nor subordinate liabilities.

216 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

Explanatory Notes 3.15 Interest Expense

The details of interest income of the bank for the For all fi nancial instruments measured at amortised period is presented under Schedule 4.29. cost, interest bearing fi nancial assets classifi ed as available-for-sale and fi nancial instruments 3.14.2 Fees and commissions designated at FVTPL, interest expense is recorded using the EIR unless it is impracticable. Fees and commissions are generally recognised on an accrual basis when the service has been provided 3.16 Employee Benefi ts or signifi cant act performed. Service Fee Income/ Expenses are recognized on accrual basis unless it is impracticable to recognize as allowed through carve- 3.16.1 Post- Retirement Benefi ts out on NFRS. The Bank has schemes of retirement benefi ts namely Gratuity, Provident Fund and Medical Allowance. 3.14.3 Dividend Income A) Defi ned Contribution Plan Dividend income is recognised when the Bank’s right to receive the payment is established, which Provident Fund is generally when the shareholders approve the dividend. For Provident Fund, the bank pays contributions to the publicly administered provident fund plans (named 3.14.4 Net Trading Income Employee Provident Fund) on a mandatory basis, and such amounts are charged to operating expenses. Net trading income includes all gains and losses The bank has no further payment obligations once from changes in fair value and the related interest the contributions have been paid. income or expense and dividends, for fi nancial assets and fi nancial liabilities held for trading. B) Defi ned Benefi t Plan

3.14.5 Net income from other fi nancial Gratuity instrument at fair value through Profi t or Loss Bank provides for gratuity to entire employee from the date of joining. The plan provides for lump sum Gains and losses arising from changes in the fair payments to employees at retirement or upon value of fi nancial instruments designated at fair value death while in employment or on termination of through profi t or loss are included in the statement employment for an amount equivalent to defi ned of profi t or loss in the period in which they arise. days’ eligible salary payable for each completed Contractual interest income and expense on fi nancial years of service. Bank deposits such gratuity amount instruments held at fair value through profi t or loss is in Citizen Investment Trust (CIT) in annual basis. recognised within net interest income.

NMB Annual Report-2018/19 217 Notes to Financial Statements For the year ended 31 Ashad 2076

The bank was in process being acquired by NMB Bank 3.17 Leases Ltd. It has already started joint operation eff ective from 11st Ashwin 2076. Hence, the gratuity liability The determination of whether an arrangement is a has been booked in full without actuarial valuation lease, or contains a lease, is based on the substance applying conservatism concept. of the arrangement and requires an assessment of whether the fulfi lment of the arrangement is Explanatory Notes dependent on the use of a specifi c asset or assets or whether the arrangement conveys a right to use the Gratuity benefi t obligations, plan assets, movement asset. in gratuity liability and fair value of assets etc. related with long term employee benefi ts has been presented  Bank as a lessee under schedule 4.23. Leases that do not transfer to the Bank substantially 3.16.2 Accumulated Leave all of the risks and benefi ts incidental to ownership of the leased items are operating leases. Operating Short Term Benefi t Liability lease payments are recognised as an expense in the income statement on a straight-line basis over the The Bank provides accumulated leave benefi t under lease term. its staff byelaw. The Home Leave is accumulated up to 90 days and there is no limit for the accumulation  Bank as a lessor of Sick Leave. Leases where the Bank does not transfer substantially Accumulated leave benefi ts are treated as short term all of the risk and benefi ts of ownership of the asset employment benefi t as allowed by Para 15 of NAS 19. are classifi ed as operating leases. Rental income is Therefore, the additional expenses on accumulated recorded as earned based on the contractual terms leave is charged to Profi t and Loss account as on of the lease in other operating income. Ashad end 2076. Explanatory Notes The bank has no further payment obligations once the contributions have been paid. Operating lease expenses is shown under other operating Lease expenses in schedule 4.37B. 3.16.3 Staff Bonus 3.18 Foreign Currency Translation Provision for bonus has been made at 10% of net profi t before such bonus. Foreign currency transactions are translated into the NPR using the exchange rates prevailing at Explanatory Notes the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of Employee benefi t reported under schedule 4.36 such transactions and from translation at year end includes provision for bonus as per bonus act. exchange rates of monetary assets and liabilities

218 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

denominated in foreign currencies are recognised in Trade Finance, Consumer Finance and ALM do the profi t or loss, except when recognised in other not fall in this category, and accordingly will not be comprehensive income. Non-monetary assets treated as derivatives. However, transactions in Loan that are measured at fair value are translated syndication and underwriting activities may have using exchange rate at the date that fair value was some of these features. determined. Explanatory Notes Explanatory Notes Details Relating to Financial Guarantee are given Foreign currency translation gain/loss is presented in Schedule 4.28.1 in Guarantees under Contingent in schedule 4.34 under other operating income. 25% Liabilities. of such revaluation gain is transferred to foreign exchange fl uctuation fund as per Section 45 of Bank The bank does not have any Loan Commitments and Financial Institutions Act. except undrawn limits of Overdraﬅ s under Schedule 4.28.2. 3.19 Financial Guarantee and Loan Commitment 3.20 Share Capital and Reserves Financial guarantee contracts are contracts that require the bank to reimburse the holder for a loss 3.20.1 Share Capital that it incurs because a specifi ed debtor fails to make Financial instruments issues are classifi ed as equity payment on a debt instrument. A loan commitment when there is no contractual obligation to transfer is a fi rm commitment to provide credit under pre- cash, other fi nancial assets or issue available number specifi ed terms and conditions in the future. Financial of own equity instruments. Incremental costs directly Guarantee contracts and Loan Commitments are attributable to the issue of new shares are shown in measured at the higher of: equity as deduction net of taxes from the proceeds.

 the expected credit losses on the exposure; or Dividends on ordinary shares classiﬁ ed as equity are recognised in equity in the period in which they are  the fair value of the instrument at initial recognition declared. (plus transaction costs) less the cumulative amount of revenue recognized on the instrument The issue expenses for the issue was charged in the year of issue and though the impact from past of the Loan commitments will be treated as derivatives Bank’s equity the amount has not been adjusted with if there is a pattern of selling the resultant assets the share capital and the Bank considered the impact within a short period aﬅ er their origination. Loan to be immaterial. commitments in our regular business like Lending,

NMB Annual Report-2018/19 219 Notes to Financial Statements For the year ended 31 Ashad 2076

3.20.2 Reserves  Special Reserve

The reserves include regulatory and free reserves. Any special reserve that is created as per the specifi c requirement of NRB directive or special instruction of  Statutory General Reserve NRB are represented as special reserve. The amount allocated to this reserve by debiting retained earning There is a regulatory requirement to set aside 20% of account are presented under this heading. the net profi t aﬅ er Tax to the general reserve until the reserve is twice the paid of share capital. The reserve  Corporate Social Responsibility Fund is the accumulation of setting aside profi ts over the years. The fund created for the purpose of corporate social responsibility by allocating 1% of Net profi t as per No Dividend (either cash dividend or bonus share) are NRB Directive is presented under this account head. distributed from the amount in General/ Statutory Reserve.  Investment Adjustment Reserve

 Assets Revaluation Reserve It is a regulatory reserve created as a cushion for adverse price movements in Bank’s investments Any Reserve created from revaluation of assets as directed by the Directives of Nepal Rastra Bank. (such as Property and Equipment, Intangible Assets, Banks are required to create Investment Adjustment Investment Property) shall be presented under this Reserve equal to 2% of Value of investment. heading. Revaluation reserves oﬅ en serve as a cushion against unexpected losses but may not be  Deferred Tax Reserve fully available to absorb unexpected losses due to the subsequent deterioration in market value and tax It is banks policy to appropriate the equivalent consequences of revaluation. The Bank has followed portion of the deferred tax assets when a net deferred cost model therefore no assets revaluation reserve is tax asset arises. In event where deferred tax liability created. arises such amounts are reclassifi ed within the equity to retained earnings.  Capital Reserve  Exchange Equalization Reserve The capital reserve represents the amount of those reserves which are in nature of capital and A bank or fi nancial institution carrying on foreign which shall not be available for distribution of cash exchange business shall make necessary accounts dividend. The amount from share forfeiture due to adjustments in the profi t and loss account of the non-payment of remaining amount for the unpaid revaluation profi ts earned as a result of fl uctuations shares, capital grants received in cash or kind, capital in the exchange rates of foreign currencies, other reserve arising out of merger and acquisition etc are than the Indian currency, at the end of the same presented under this heading. fi scal year. While making such accounts adjustment in the profi t and loss account, if revaluation gain has

220 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

been made in any fi scal year, at least twenty fi ve per and Receivables are categorised as Available for cent of such profi ts shall be credited to the exchange Sale fi nancial instruments and recorded at Fair equalization fund as per Section 45 of Bank and Value through Other Comprehensive Income. The Financial Institutions act (2073). cumulative amount of changes in fair value of those fi nancial assets is presented as fair value reserve.  Staff Training Reserve  Other reserve Bank has regulatory requirement to set aside 3% of the previous year’s staff cost for staff training and any Any reserve created with specifi c or non-specifi c defi cit on such amount are set aside in the reserves. purpose (except stated in above) are presented under thus by disclosing accounting heads.  Regulatory Reserve  Movement in reserves The amount that is allocated from profi t or retained earnings of the Bank to this reserve as per the Movements in the reserves are given in detail in Directive of NRB for the purpose of implementation Statement of Changes in Equity. of NFRS and which shall not be regarded as free for distribution of dividend (cash as well as bonus Explanatory Notes shares) shall be presented under this account head. The amount allocated to this reserve shall include Reserves are depicted under Schedule 4.27. interest income recognized but not received in cash, diff erence of loan loss provision as per NRB directive 3.21 Earnings per share and impairment on loan and advance as per NFRS (in case lower impairment is recognized under NFRS), The Bank measures earning per share on the basis amount equals to deferred tax assets, actual loss of the earning attributable to the equity shareholders recognized in other comprehensive income, amount for the period. The number of shares is taken as the of goodwill recognized under NFRS etc. weighted average number of shares for the relevant period as required by NAS 33 - Earnings Per Share.  Actuarial Gain/(Loss) Reserve There are no instruments, such as convertibles, that Actuarial Gain/(Loss) Reserve has been created to would require dilution of EPS, therefore diluted EPS record the Actuarial gain or loss occurring due to the has not been computed and disclosed. change in Actuarial Assumption under NAS 19 as Per NRB Guidelines . Actuarial gain or loss as a result of 3.22 Segmental Reporting Change in Gratuity valuations has been included in the Reserve. The Bank’s segmental reporting is in accordance with NFRS 8 Operating Segments. Operating segments  Fair Value Reserve are reported in a manner consistent with the internal reporting provided to the bank’s management, Financial Assets that are not classifi ed as Fair Value which is responsible for allocating resources and through Profi t and Loss, Held To maturity and Loans assessing performance of the operating segments.

NMB Annual Report-2018/19 221 Notes to Financial Statements For the year ended 31 Ashad 2076

Members of Risk All transactions between business segments are S.N. Designation conducted on an arm’s length basis, with intra- Management Committee segment revenue and costs being eliminated in Head 1 Rajendra Kumar Batajoo Co-ordinator Offi ce. Income and expenses directly associated with 2 Shree Krishna Regmi Member each segment are included in determining business 3 Madhav Adhikari Member segment performance. 4 Kiran Paudel Member Secretary The Bank has determined segments based on district by the management for decision making purpose. The Committee meets at least four times annually. The committee oversees and reviews the Explanatory Notes fundamental prudential risks including operational, credit, market, reputational, capital and liquidity risk Operational segmental information has been provided etc. under Disclosures and Additional Information under Schedule 5.4. The responsibilities of Risk Management Committee are as follows: 3.23 Interim Financial Reporting a. Formulate policies and guidelines for identifi cation, measurement, monitoring and Interim reports corresponding to the fi nancial control all major risk categories. statements had been reported in accordance with b. Ensuring the bank has clear, comprehensive and the regulatory reporting requirements. Those well documented policies and procedure. statements have been published quarterly in national c. Defi ning the bank’s overall risk tolerance in level newspaper. The bank has utilized the benefi ts relation to credit risk. provided by Carve-out on NFRS for reinstatement of d. Ensuring that bank’s signifi cant risks exposure is earlier year fi gures. maintained at prudent levels and consistent with the available capital.

5. Disclosures and Additional Apart from Board Level Risk Management Committee Information the other committees and groups as mentioned below supports for Overall Risk Management. 5.1 Risk Management i) Risk Governance In compliance with Nepal Rastra Bank Directive on 6 “Corporate Governance”, the Board of bank has Risk management committee of the bank has formed established a Risk Management Committee with to review the credit risk, market risk and liquidity risk clear terms of reference. As at the date of this report, of the bank. Apart from this the bank has formed the the Bank’s Risk Management Committee comprised Assets Liability Management Committee to monitor of the following: Liquidity risk as well as market risk, AML CFT committee in order to monitor the operational risk. The committee and subcommittee has eﬀ ectively discharged their duties and responsibility.

222 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

Risk Management Department conducts periodical borrower. The factors considered in evaluating fi nancial surveillance and monitoring. In addition loan applications normally included prospects of to this, the risk management committee analyse the business, management of the fi rm/company, the Stress testing of the bank as required by Nepal fi nancial analysis- income statement, balance sheet, Rastra Bank and its impact and corrective action to cash fl ow statement, key fi nancial indicators, key risk mitigate the risk. and mitigates. Further, inspection and supervision are also conducted before approval of the loan for Through its risk management framework, the pre-analysis and aﬅ er the disbursement of loan as Bank seeks to effi ciently manage credit, market well for monitoring the utilization of loan. and liquidity risks which arise directly through the Bank’s commercial activities as well as operational, 2) Operational Risk regulatory and reputational risks which arise as a normal consequence of any business undertaking. Operational risk is the prospect of loss of resulting As part of this framework, the Bank uses a set of from inadequate or failed procedures, systems or principles that describe its risk management culture. policies, employee errors, system failures, fraud The bank has developed Risk Management Policy, or other criminal activity, any event that disrupts Guideline and Framework 2017 to manage Credit business processes. risk, Market risk and liquidity risk. Operational risk exposures are managed through The major risk areas and mitigation mechanism is as a consistent set of management processes that given below; drive risk identifi cation, assessment, control and monitoring. For the control of operational risk of 1) Credit Risk institution, it has Financial Administration Policy, Employee Bylaws, operational manual, AML/ Credit risk is the potential for loss due to failure of CFT policy, Suspicious Transaction identifi cation counterparty to meet its obligations to pay the Bank Procedure, Politically exposed person policy, which in accordance with agreed terms. guides the day to day operation.

The bank has Credit Policy Guidelines (CPG) that, inter Each risk control owner is responsible for identifying alia, consist of areas of lending, eligibility of borrower, risks that are material and for maintaining an eﬀ ective loan application format and requirement, necessary control environment across the organization. Risk documents for processing loans, risk assessment control owners have responsibility for the control of areas, loan approval authority and other general operational risk arising from the management of the credit principles. The CPG has been formulated by following activities: External Rules and Regulations, keeping in mind the prudential norms given by NRB. Liability, Legal Enforceability, Damage or Loss of Physical Assets, Safety and Security, Internal A standardized loan application forms has been in Fraud or Dishonesty, External Fraud, Information use for facilitating collection and analysis of all the Security, Processing Failure, and Model. Operational relevant data for evaluating credit worthiness and risks can arise from all business lines and from proper evaluation of the credit risk of the prospective all activities carried out by the Bank. Operational

NMB Annual Report-2018/19 223 Notes to Financial Statements For the year ended 31 Ashad 2076

Risk management approach seeks to ensure Reputational risk is managed by the management management of operational risk by maintaining a committee which are responsible for protecting complete process universe deﬁ ned for all business the institution’s reputation locally and has the segments, products and functions processes. responsibility to ensure that the Bank does not undertake any activities that may cause material 3) Market Risk damage to the reputation of institution.

Risks arising out of adverse movements in interest 6) Employee Benefi t Risk rates and equity prices are covered under Market Risk Management. Market Risk is the potential for Employee benefi t risk is the potential risk of loss loss of earnings or economic value due to adverse due to having to meet shortfall in the Bank’s defi ned changes in fi nancial market rates or prices. Institution benefi ts gratuity and leave encashment schemes. exposure to market risk arises principally from customer driven transactions. The gross obligation for gratuity is calculated considering the salary at the time of retirement of In line with Risk Management Guidelines prescribed the individual staff and number of years’ service with by NRB, the Bank focuses on risk management the Bank. The home leave can be accumulated for in addition to that Interest rate risk is assessed maximum period of 60 days for total period served at a regular interval to strengthen market risk by individual staff . The gross obligation for leave management. The market risk is managed within the encashment is calculated considering the last drawn risk tolerances and market risk limits set by ALCO. salary multiplied by no of eligible days for leave ALCO regularly meets, analyse and takes decision encashment. over the Market Risk by analysing the internal as well as external factor. 7) Internal Control

4) Liquidity Risk The Board is committed to managing risks and in controlling its business and fi nancial activities in Liquidity risk is the potential that the Bank either does a manner which enables it to maximize profi table not have suffi cient liquid fi nancial resources available business opportunities, avoid or reduce risks which to meet all its obligations as they fall due, or can can cause loss or reputational damage, ensure only access these fi nancial resources at excessive compliance with applicable laws and regulations and cost. The Liquidity Risk is managed by ALCO. The enhance resilience to external events. To achieve ALCO has developed the Unifi ed Treasury circular for this, the Board has adopted policies and procedures overall liquidity management of bank. of risk identifi cation, risk evaluation, risk mitigation and control/monitoring. 5) Reputational Risk The eff ectiveness of the Company’s internal control Reputational risk is a risk of loss resulting from system is reviewed regularly by the Board, its damages to reputation of institution, in lost revenue; Committees, Management and Internal Audit. The increased operating, capital or regulatory costs; or Audit Committee has reviewed the eff ectiveness of destruction of shareholder value. the Bank’s system of internal control during the year

224 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

and provided feedback to the Board as appropriate. The second line of defense lies with Compliance The bank has outsourced the Internal Audit function Offi cer, which assesses and monitors the compliance to maintain independency on the internal control and integrity risks and coordinates its control system of institution. The Internal Audit monitors activities with the Risk Management Unit. compliance with policies/standards and the eff ectiveness of internal control structures across Internal Audit is the third line of defense. the Company through its program of business/unit audits. The Internal Audit function is focused on the The internal audit function assists the Development areas of greatest risk as determined by a risk-based Bank in identifying, assessing, monitoring and assessment methodology. Internal Audit reports reporting on compliance risks in matters relating are quarterly forwarded to the Audit Committee. to the institution, its operations and the personal The fi ndings of all audits are reported to the Chief conduct of staff members. The Head of IAD reports to Executive Offi cer and Business Heads for initiating the Audit Committee. immediate corrective measures. Strategic Risk 8) Any Other Risk Strategic risk is the risk in achieving Development Compliance Risk Bank’s strategic objectives, both from internal and external events and scenarios which prevent from Compliance risk is the risk of legal or regulatory achieving strategic objectives. sanctions, material fi nancial loss, or loss to reputation due to failure to comply with laws, rules Strategic Risk can be further defi ned as: and standards. • Exposure to loss resulting from a strategy that OMDB is committed to follow best practices and runs out to be inappropriate. market standards in the areas of accountability, transparency and business ethics. The Development • Risk associated with future plans and Bank aims at a zero tolerance of misconduct and strategies, including plans for entering new corruption. services, expanding existing services through enhancements and merger, enhancing In the day-to-day operations the three lines of infrastructures etc. defense model defi nes the roles and responsibilities for compliance and integrity risk in the Development Current and prospective impact of strategic decisions Bank. made by management arising from adverse business decisions, improper implementation of decisions or The fi rst line of defense lies with the respective lack of responsiveness to industry change etc. Development Bank departments and units, which are responsible for ensuring that compliance risks are Periodic (yearly) review of the strategy is being identifi ed, understood and reported to the decision done by Management Committee and reported to making bodies of the Development Bank and to BOD regarding: status of the strategic objective’s Compliance Offi cer. achievement as decided, execution status whether

NMB Annual Report-2018/19 225 Notes to Financial Statements For the year ended 31 Ashad 2076

the right talent and infrastructures support the A separate AML/CFT Unit is established under achievement of the objective or about unintended direct supervision and control of Compliance Offi cer consequences of the strategy, if any for their timely which looks aﬅ er the eff ective implementation and corrections/updates if found to be necessary. compliance of AML/CFT related prevailing Acts, Rules and Directives. Interest Rate Risk 5.2 Capital Management Interest rate risk arises when there is a mismatch between positions, which are subject to interest rate i. Qualitative disclosures adjustment within a specifi ed period. Interest rate risk is usually assessed from two common perspectives. The bank has maintained the capital adequacy as Earnings perspective, which focuses on the impact per Capital adequacy framework, 2007 (Updated July of variation in interest rate on accruals or reported 2008) as required by Nepal Rastra Bank. The main earnings, and economic value perspective, which objective of this framework is to develop a safe and refl ects the impact of fl uctuation in the interest rates sound fi nancial system by way of suffi cient amount on economic value of a fi nancial institution. of qualitative capital and risk management practices. The total equity of the bank comprises of paid up The Development Bank measures and manages capital, statutory reserves and other reserves. The interest rate risk by estimating the sensitivity of the bank does not have any other complex or hybrid economic value of its balance sheet to an interest capital instruments. Capital adequacy ratio as on rate shock. The sensitivity is measured by means of Ashad end 2076 is 13.77% and 14.91% on core capital interest rates on the present value of interest-bearing and capital fund respectively. assets and liabilities. Assessment of capital adequacy of bank is done on AML/CFT Risk regular basis taking into considerations the exposure of bank. Also, the analysis of possible impact on AML/CFT risk is related with providing fi nancial capital adequacy is being done on regular basis taking services to money launders and terrorists for into consideration the future impacts on assumptive channelling of money derived from crime or aimed at basis. Capital adequacy of bank and impact in capital funding terrorism. due to future change in nature and size of business is discussed in Risk Management Committee and is The strictness of the provisions made in laws and summarized in board. Regular monitoring of nature directives refl ect the seriousness of this issue; of business is being done so that unexpected negative non-compliance of which may cause signifi cant impact could not take place in capital adequacy of reputational risk as well as may result in adverse bank. Reporting to regulatory body is being done as consequences. Development Bank have been closely prescribed by compliance department. monitoring the AML/CFT policies, procedures, guidelines and practices of Banks and Financial The internal capital adequacy assessment process Institutions (BFIs). (ICAAP) is a comprehensive process which requires board and senior management oversight, monitoring,

226 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076

reporting and internal control reviews at regular • Policies and procedures designed to ensure that the intervals to ensure the alignment of regulatory capital bank identifi es, measures, and reports all material requirement with the true risk profi le of the bank and risks; thus ensure long-term safety and soundness of the bank. The key components of an eff ective ICAAP are • A process that relates capital to the level of risk; discussed below. • A process that states capital adequacy goals with a. Board and senior management oversight respect to risk, taking account of the bank’s strategic focus and business plan; and Board and senior management oversight bank management is responsible for understanding the • A process of internal control, reviews and audit to nature and level of risk being taken by the bank and ensure the integrity of the overall management how this risk relates to adequate capital levels. It is process. also responsible for ensuring that the formality and sophistication of the risk management processes is c. Comprehensive assessment of risk commensurate with the complexity of its operations. A sound risk management process, thus, is the All material risks faced by the bank should be foundation for an eff ective assessment of the addressed in the capital assessment process. Nepal adequacy of a bank’s capital position. Rastra Bank recognizes that not all risks can be measured precisely. However, bank should develop a The board of directors of the bank are responsible for process to estimate risks with reasonable certainties. setting the bank’s tolerance for risks. The board also In order to make a comprehensive assessment of ensures that management establishes a mechanism risks, the process should, at minimum, address the for assessing various risks; develops a system to following forms of risk. relate these risks to the bank’s capital level and sets up a method for monitoring compliance with internal 1. Credit Risk policies. It is equally important that the board instills 2. Credit Concentration Risk strong internal controls and thereby an eff ective 3. Operational Risk control environment through adoption of written 4. Market Risk policies and procedures and ensures that the policies 5. Liquidity Risk and procedures are eff ectively communicated throughout the bank. d. Monitoring and reporting

b. Sound Capital Assessment The bank has established an adequate system for monitoring and reporting risk exposures and Another crucial component of an eff ective ICAAP assessing how the bank’s changing risk profi le aff ects is the assessment of capital. In order to be able to the need for capital. The bank’s senior management make a sound capital assessment the bank should, or board of directors, on a regular basis, receive at minimum, have the following: reports on the bank’s risk profi le and capital needs. These reports allow senior management to:

NMB Annual Report-2018/19 227 Notes to Financial Statements For the year ended 31 Ashad 2076

• Evaluate the level and trend of material risks and to the bank’s capital level, and establishes a method their eff ect on capital levels; for monitoring compliance with internal policies. The board should regularly verify whether its system of • Evaluate the sensitivity and reasonableness of internal controls is adequate to ensure well-ordered key assumptions used in the capital assessment and prudent conduct of business. The bank should measurement system; conduct periodic reviews of its risk management process to ensure its integrity, accuracy, and • Determine that the bank holds suffi cient capital reasonableness. Key areas that should be reviewed against the various risks and is in compliance include: with established capital adequacy goals; and • Appropriateness of the bank’s capital assessment • Assess its future capital requirements based process given the nature, scope and complexity on the bank’s reported risk profi le and make of its activities; necessary adjustments to the bank’s strategic plan accordingly. • Identifi cation of large exposures and risk concentrations;

• Accuracy and completeness of data inputs into e. Internal Control Review the bank’s assessment process;

The bank’s internal control structure is essential • Reasonableness and validity of scenarios used in to a sound capital assessment process. Eﬀ ective the assessment process; and control of the capital assessment process includes an independent review and, where appropriate, the • Stress testing and analysis of assumptions and involvement of internal or external audits. The bank’s inputs. board of directors has a responsibility to ensure that management establishes a system for assessing The capital adequacy table for the year ended Ashad the various risks, develops a system to relate risk 2076 is:

228 www.nmbbanknepal.com Capital Adequacy Table At the month end of Ashad, 2076

(Rs. in '000)

1. 1 RISK WEIGHTED EXPOSURES Current Period Previous Period

a Risk Weighted Exposure for Credit Risk 25,066,479.49 18,056,011.77 b Risk Weighted Exposure for Operational Risk 1,198,855.51 834,418.60 c Risk Weighted Exposure for Market Risk 1,490.35 1,238.28 Total Risk Weighted Exposures (Before adjustments of Pillar II) 26,266,825.35 18,891,668.65 Adjustments under Pillar II SRP 6.4a (6) Add .....% of the total deposit due to insuﬃ cient Liquid Assets - Total Risk Weighted Exposures (Aﬅ er Bank's adjustments of Pillar II) 26,266,825.35 18,891,668.65

1.2 CAPITAL Current Period Previous Period

(A) Core Capital (Tier 1) 3,618,149.28 3,238,130.71 a Paid up Equity Share Capital 2,515,235.60 2,515,235.60 b Irredeemable Non-cumulative preference shares c Share Premium 28,614.71 - d Proposed Bonus Equity Shares - - e Statutory General Reserves 543,946.96 436,857.41 f Retained Earnings 548,909.52 341,032.70 g Un-audited current year cumulative proﬁ t/(loss) - h Capital Redemption Reserve - - i Capital Adjustment Reserve - - j Dividend Equalization Reserves - - k Other Free Reserve - l Less: Goodwill - - m Less: Deferred Tax Assets - 34,608.91 n Less: Intangible Assets 4,384.56 6,213.14 o Less: Investment in equity in licensed Financial Institutions - - p Less: Investment in equity of institutions with ﬁ nancial interests - - q Less: Investment in equity of institutions in excess of limits - - r Less: Investments arising out of underwriting commitments - - s Less: Reciprocal crossholdings - - t Less: Purchase of land & building in excess of limit and unutilized 14,172.95 14,172.95 u Less: Other Deductions - -

NMB Annual Report-2018/19 229 Capital Adequacy Table At the month end of Ashad, 2076

(Rs. in '000)

1.2 CAPITAL Current Period Previous Period

Adjustments under Pillar II SRP 6.4a(1) - SRP 6.4a(2) -

B) Supplementary Capital (Tier 2) 297,511.95 219,827 a Cumulative and/or Redeemable Preference Share - - b Subordinated Term Debt - - c Hybrid Capital Instruments - - d General loan loss provision 295,984 217,277.70 e Exchange Equalization Reserve 27.46 27.46 f Investment Adjustment Reserve 1,500.00 2,521.46 g Asset Revaluation Reserve - - h Other Reserves - - Total Capital Fund (Tier I and Tier II) 3,915,661.23 3,457,957.33

1.3 CAPITAL ADEQUACY RATIOS Current Period Previous Period

Tier 1 Capital to Total Risk Weighted Exposures (Aﬅ er Bank's adjustments of Pillar II) 13.77% 17.14% Tier 1 and Tier 2 Capital to Total Risk Weighted Exposures(Aﬅ er Bank's adjustments of Pillar II) 14.91% 18.30%

230 www.nmbbanknepal.com ------1.48 (Rs. in '000) f=d*e " Risk 803,263.76 Weighted 6,978,439.57 Exposures" 0% 0% 0% 0% 0% 0% 0% 0% 0% 20% 50% 20% 50% 20% 20% 50% 20% 20% 100% 150% 100% 100% 150% 100% 150% 100% 100% e Risk Weight ------1.48 557,277.51 617,375.00 d=a-b-c Net Value 1,148,397.93 4,016,318.79 6,978,439.57 ------c Eligible CRM b " Specifi c " Specifi Provision " Provision - 1.48 a 557,277.51 617,375.00 1,148,397.93 4,016,318.79 6,978,439.57 Book Value A. Balance Sheet Exposures Cash Balance Balance With Nepal Rastra Bank Nepal Rastra Balance With Gold Securities in Nepalese Government Investment of Nepal All Claims on Government Bank securities in Nepal Rastra Investment Bank All claims on Nepal Rastra Bank (ECA 0-1) and Central Government Claims on Foreign Bank (ECA -2) and Central Government Claims on Foreign Bank (ECA -3) and Central Government Claims on Foreign Bank (ECA-4-6) and Central Government Claims on Foreign Bank (ECA -7) and Central Government Claims on Foreign by the framework ECB, EC and MDB's recognized Claims On BIS, IMF, Banks Development Claims on Other Multilateral Claims on Public Sector Entity (ECA 0-1) Claims on Public Sector Entity (ECA 2) Claims on Public Sector Entity (ECA 3-6) Claims on Public Sector Entity (ECA 7) Claims on domestic banks that meet capital adequacy requirements Claims on domestic banks that do not meet capital adequacy requirements bank (ECA Rating 0-1) Claims on foreign bank (ECA Rating 2) Claims on foreign bank (ECA Rating 3-6) Claims on foreign bank (ECA Rating 7) Claims on foreign with a operating in SAARC region bank incorporated Claims on foreign capital requirement regulatory their respective er of 1% above buff Claims on Domestic Corporates (ECA 0-1) Corporates Claims on Foreign Risk Weighted Exposure for Credit Risk for Credit Exposure Risk Weighted At the month end of Ashad, 2076

NMB Annual Report-2018/19 231 ------181 1.48 58,175 803,264 466,868 742,790 320,994 (Rs. in '000) "Risk 6,978,440 4,651,327 6,688,315 1,698,741 1,365,949 1,061,981 f=d*e Weighted 24,837,026 Exposures" 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 20% 60% 20% 50% 20% 50% 20% 20% 50% 20% 20% 50% 75% 60% 100% 150% 100% 100% 150% 100% 100% 150% 100% 100% 150% 150% 100% 150% 150% 100% 150% 100% 100% 100% e Risk Weight ------906 1.48 6,036 96,958 557,278 617,375 466,868 742,790 320,994 4,016,319 1,148,398 6,978,440 6,201,769 4,458,877 1,132,494 2,276,581 1,061,981 d=a-b-c 30,084,064 Net Value ------c 240,602 240,602 Eligible CRM - b 238,322 238,322 "Specifi c "Specifi Provision" - - 906 1.48 6,036 96,958 a 617,375 557,278 705,190 742,790 320,994 1,148,398 4,016,319 6,978,440 6,442,371 4,458,877 1,132,494 2,276,581 1,061,981 30,562,988 Book Value A. Balance Sheet Exposures A. Balance Sheet Exposures Balance With Nepal Rastra Bank Nepal Rastra Balance With Gold Securities in Nepalese Government Investment of Nepal All Claims on Government Bank securities in Nepal Rastra Investment Bank All claims on Nepal Rastra Bank (ECA 0-1) and Central Government Claims on Foreign Bank (ECA -2) and Central Government Claims on Foreign Bank (ECA -3) and Central Government Claims on Foreign Bank (ECA-4-6) and Central Government Claims on Foreign Bank (ECA -7) and Central Government Claims on Foreign by the framework ECB, EC and MDB's recognized Claims On BIS, IMF, Banks Development Claims on Other Multilateral Claims on Public Sector Entity (ECA 0-1) Claims on Public Sector Entity (ECA 2) Claims on Public Sector Entity (ECA 3-6) Claims on Public Sector Entity (ECA 7) Claims on domestic banks that meet capital adequacy requirements Cash Balance Claims on domestic banks that do not meet capital adequacy requirements in equity and other capital instruments of institutions listed stock exchange Investments in equity and other capital instruments of institutions not listed the stock exchange Investments TOTAL (A) TOTAL Other Assets (as per attachment) Cash in transit and other cash items in the process of collection and other cash items in the process Cash in transit Interest Receivable/claim on government securities Receivable/claim on government Interest Claims on foreign bank (ECA Rating 0-1) Claims on foreign bank (ECA Rating 2) Claims on foreign bank (ECA Rating 3-6) Claims on foreign bank (ECA Rating 7) Claims on foreign with a operating in SAARC region bank incorporated Claims on foreign capital requirement regulatory their respective er of 1% above buff Claims on Domestic Corporates (ECA 0-1) Corporates Claims on Foreign (ECA 2) Corporates Claims on Foreign (ECA 3-6) Corporates Claims on Foreign (ECA 7) Corporates Claims on Foreign Regulatory Retail Portfolio (Not Overdue) property by residential loan secured Staff Claims fulfi lling all criterion of regularity retail except granularity retail lling all criterion of regularity Claims fulfi properties) by residential Past due claims (except for secured High Risk claims Claims secured by residential properties by residential Claims secured properties by residential Claims not fully secured (Overdue) properties by residential Claims secured estate real by Commercial Claims secured Risk Weighted Exposure for Credit Risk for Credit Exposure Risk Weighted At the month end of Ashad, 2076

232 www.nmbbanknepal.com ------"Risk 108,849.03 120,604.60 Weighted 229,453.62 Exposures" 25,066,479.49 25,066,479.49

0% 0% 20% 10% 20% 20% 50% 50% 20% 50% 50% 20% 50% 50% 50% 20% 200% 100% 150% 100% 150% 100% 150% 100% 100% 100% 100% 100% 100% 100% Risk Weight ------108,849.03 603,022.98 711,872.01 Net Value 30,795,936.21 30,795,936.21 ------240,601.82 240,601.82 Eligible CRM ------"Specifi c "Specifi 238,321.70 238,321.70 Provision" ------108,849.03 603,022.98 711,872.01 Book Value 31,274,859.73 31,274,859.73 B. Off Balance Sheet Exposures B. Off Revocable Commitments Bills Under Collection Liabilities Exchange Contract Forward Original Maturity Upto 6 months domestic Commitments With LC counterparty counterparty (ECA Rating 0-1) Foreign counterparty (ECA Rating 2) Foreign counterparty (ECA Rating 3-6) Foreign counterparty (ECA Rating 7) Foreign 6 months domestic Original Maturity Over Commitments With LC counterparty counterparty (ECA Rating 0-1) Foreign counterparty (ECA Rating 2) Foreign counterparty (ECA Rating 3-6) Foreign counterparty (ECA Rating 7) Foreign domestic Bid Bond, Performance Bond and Counter guarantee counterparty counterparty (ECA Rating 0-1) Foreign counterparty (ECA Rating 2) Foreign counterparty (ECA Rating 3-6) Foreign counterparty (ECA Rating 7) Foreign Underwriting commitments Lending of Bank's Securities or Posting as collateral Assets sale with recourse Agreements, Repurchase Advance Payment Guarantee Guarantee Financial Acceptances and Endorsements and Securities Unpaid portion of Partly paid shares commitments (short term) Credit Irrevocable commitments (long term) Credit Irrevocable with a operating in SAARC region bank incorporated "Claims on foreign capital requirement" regulatory their respective er of 1% above buff Other Contingent Liabilities Unpaid Guarantee Claims Unpaid Guarantee TOTAL (B) TOTAL Total RWE for credit Risk Before Adjustment (A) +(B) Risk Before RWE for credit Total Adjustments under Pillar II er Bank's adjustments under Pillar II Risk a RWE for Credit Total Risk Weighted Exposure for Credit Risk for Credit Exposure Risk Weighted At the month end of Ashad, 2076

NMB Annual Report-2018/19 233 ------Total Total (Rs. in '000) 240,601.82 240,601.82 - (i) Banks of Foreign of Foreign Sec/G'tee - (h) MDBs G'tee of - (g) banks G'tee of domestic - (f) of Other Sec/G'tee Sovereigns - (e) Nepal Govt. of Govt. G'tee of - - (d) NRB Govt.& Govt.& Securities - (c) Gold - (b) banks/FI Deposits with other (a) Deposits with Bank 240,601.82 240,601.82 Credit exposures Credit Investments in equity and other capital instruments of Investments institutions listed in stock exchange in equity and other capital instruments of Investments institutions not listed in the stock exchange Other Assets (as per attachment) Total Balance Sheet Exposures Balance Sheet Exposures Bank (ECA -2) and Central government Claims on Foreign Bank (ECA -3) and Central government Claims on Foreign Bank (ECA-4-6) and Central government Claims on Foreign Bank (ECA -7) and Central government Claims on Foreign Banks Development Claims on Other Multilateral Claims on Public Sector Entity (ECA 0-1) Claims on Public Sector Entity (ECA 2) Claims on Public Sector Entity (ECA 3-6) Claims on Public Sector Entity (ECA 7) Claims on domestic banks that meet capital adequacy requirements Claims on domestic banks that do not meet capital adequacy requirements bank (ECA Rating 0-1) Claims on foreign bank (ECA Rating 2) Claims on foreign bank (ECA Rating 3-6) Claims on foreign bank (ECA Rating 7) Claims on foreign in SAARC region bank incorporated Claims on foreign regulatory their respective er of 1% above with a buﬀ operating capital requirement Claims on Domestic Corporates (ECA 0-1) Corporates Claims on Foreign (ECA 2) Corporates Claims on Foreign (ECA 3-6) Corporates Claims on Foreign (ECA 7) Corporates Claims on Foreign Regulatory Retail Portfolio (Not Overdue) except retail lling all criterion of regularity Claims fulﬁ granularity properties by residential Claims secured properties by residential Claims not fully secured (Overdue) properties by residential Claims secured Real Estate by Commercial Claims secured by residential Past due claims (except for secured properties) High Risk claims Eligible Credit Risk Mitigants Eligible Credit At the month end of Ashad, 2076

234 www.nmbbanknepal.com ------Total Total (Rs. in '000) 240,601.82 - - (i) Banks of Foreign of Foreign Sec/G'tee - - (h) MDBs G'tee of - - (g) banks G'tee of domestic - - (f) of Other Sec/G'tee Sovereigns - - (e) Nepal Govt. of Govt. G'tee of - - (d) NRB Govt.& Govt.& Securities - - (c) Gold - - (b) banks/FI Deposits with other - (a) Deposits with Bank 240,601.82 Credit exposures exposures Credit Grand Total Grand Oﬀ Balance Sheet Exposures Oﬀ Liabilities Exchange Contract Forward Original Maturity Upto 6 months Commitments With LC domestic counterparty counterparty (ECA Rating 0-1) Foreign counterparty (ECA Rating 2) Foreign counterparty (ECA Rating 3-6) Foreign counterparty (ECA Rating 7) Foreign 6 months Original Maturity Over Commitments With LC domestic counterparty counterparty (ECA Rating 0-1) Foreign counterparty (ECA Rating 2) Foreign counterparty (ECA Rating 3-6) Foreign counterparty (ECA Rating 7) Foreign domestic Bid Bond, Performance Bond and Counter guarantee counterparty counterparty (ECA Rating 0-1) Foreign counterparty (ECA Rating 2) Foreign counterparty (ECA Rating 3-6) Foreign counterparty (ECA Rating 7) Foreign Underwriting commitments Lending of Bank's Securities or Posting as collateral Assets sale with recourse Agreements, Repurchase Advance Payment Guarantee Guarantee Financial Acceptances and Endorsements and Securities Unpaid portion of Partly paid shares commitments (short term) Credit Irrevocable commitments (long term) Credit Irrevocable Other Contingent Liabilities Claims Unpaid Guarantee Total Eligible Credit Risk Mitigants Eligible Credit At the month end of Ashad, 2076

NMB Annual Report-2018/19 235 Risk Weighted Exposure for Operational Risk At the month end of Ashad, 2076 (Rs. in '000) Fiscal Year S.N. Particulars 2072/073 2073/074 2074/075 1 Net Interest Income 444,738.83 760,952.48 847,608.78 2 Commission and Discount Income 8,986.45 15,355.10 26,153.04 3 Other Operating Income 58,242.09 87,688.02 147,735.47 4 Exchange Fluctuation Income - 18.32 232.44 5 Addition/Deduction in Interest Suspense during the period - - - 6 Gross income (a) 511,967.37 864,013.91 1,021,729.73 7 Alfa (b) 15% 15% 15% 8 Fixed Percentage of Gross Income [c=(a×b)] 76,795.11 129,602.09 153,259.46 9 Capital Requirement for operational risk (d) (average of c) 119,885.55 10 Risk Weight (reciprocal of capital requirement of 10%) in times (e) 10 11 Equivalent Risk Weight Exposure [f=(d×e)] 1,198,855.51

SRP 6.4a (8) Adjustments under Pillar II (If Gross Income for the last three years is negative) 1 Total Credit and Investment (net of Speciﬁ c Provision) of releted month - 2 Capital Requirement for Operational Risk (5% of net credit and investment) - 3 Risk Weight (reciprocal of capital requirement of 10%) in times 10 4 Equivalent Risk Weight Exposure (g) - 5 Equivalent Risk Weight Exposure [h=f+g] 1,198,855.51

236 www.nmbbanknepal.com Risk Weighted Exposure for Operational Risk At the month end of Ashad, 2076

Relevant Open S.No. Currency Open Position (FCY) Exchange Rate Open Position (NPR) Position 1 INR 1,142,630.00 1.60 1,829,065 1,829,065 2 USD 6,765.00 109.65 741,782 741,782 3 GBP 75.00 136.94 10,271 10,271 4 EUR 1,900.00 123.18 234,033 234,033 5 THB - - 6 CHF - - 7 AUD 750.00 76.80 57,596 57,596 8 CAD - - 9 SGD - - 10 JPY 44,000.00 1.02 44,660 44,660 11 HKD - - 12 DKK - - 13 SEK - - 14 SAR 500.00 28.91 14,453 14,453 15 QAR - - - 16 AED 1,700.00 28.74 48,850 48,850 17 MYR - - 18 KRW - - 19 CNY - - 20 KWD - - 21 BHD - - - 22 - - 23 - - (a) Total Open Position 2,980,708 2,980,708 (b) Fixed Percentage 5% (c) Capital Charge for Market Risk (=a×b) 149,035 (d) Risk Weight (reciprocal of capital requirement of 10%) in times 10 (e) Equivalent Risk Weight Exposure (=c×d) 1,490,354

NMB Annual Report-2018/19 237 Notes to Financial Statements For the year ended 31 Ashad 2076

5.3 Classifi cation of Financial assets and fi nancial liabilities - FY 2075/76 Fair value through other Fair value Financial Assets Amortized Cost comprehensive through profi t or Total income loss Cash in hand 557,277,513 557,277,513 Balances with B/FIs - - Money at call and short notice 4,016,320,269 4,016,320,269 Interbank placement - - Balance at NRB 1,148,397,928 1,148,397,928 Derivative fi nancial instrument - Loans & Advances 23,377,007,831 23,377,007,831 Government bonds 624,595,438 624,595,438 Government treasury bills - - Equity investments 295,201,666 295,201,666 Other assets 25,599,588 25,599,588 Total Financial Assets 29,749,198,568 295,201,666 - 30,044,400,234

Fair value through proﬁ t or loss (FVTPL) Financial Liabilities Amortized Cost Total Designated at Held for trading FVTPL Deposits from customers 24,153,016,531 24,153,016,531 Due to Banks & Financial Institutions 1,496,132,384 1,496,132,384 Due to Nepal Rastra Banks - - Debt Securities - - Employee related liabilities 88,911,284 88,911,284 Bills payable 674,863 674,863 Creditors and accruals 4,324,815 4,324,815 Interest payable on deposit 120,814,734 120,814,734 Interest payable on borrowing - - Unpaid Dividend 1,050,791 1,050,791 Liabilities under Finance Lease 16,544,197 16,544,197 Other liabilities 124,199,239 124,199,239 Total Financial Liabilities 26,005,668,839 - - 26,005,668,839

238 www.nmbbanknepal.com - - - 2,060,375 6,039,986 3,071,447 5,692,503 1,060,718 18,956,928 22,228,363 72,046,827 94,180,476 Level 3 Level 800,622,192 504,803,689 614,140,643 117,893,475 2,964,143,206 14,201,191,241 15,447,288,578 Level 2 Level Level 1 Level 2073-74 265,007,590 380,168,136 - - - - 760,168 3,841,119 7,098,270 5,589,220 1,058,557 14,143,699 63,014,290 Level 3 Level 613,040,083 599,112,852 140,666,589 130,151,695 4,064,238,564 1,122,470,190 18,569,534,331 20,856,078,516 Level 2 Level Level 1 Level 237,882,069 535,417,759 2074-2075 ------674,863 3,020,400 4,324,815 1,050,791 25,599,588 88,911,284 Level 3 Level 624,595,438 120,814,734 124,199,239 4,016,320,269 1,148,397,928 23,377,007,831 24,153,016,531 Level 2 Level Level 1 Level 2075-76 292,181,266 557,277,513 Fair Value through profi t or loss profi through Value Fair OCI through Value Fair Equity investments Fair Value of Financial Assets – of Financial Value Fair Held at Amortised Cost Cash in hand Balances with B/FIs Hierachy of fair value measurement of fi nancial assets at fair value of fi of fair value measurement Hierachy Particulars Money at call and short notice Interbank placement Balance at NRB Derivative fi nancial instrument fi Derivative Loans & Advances Government bonds Government Government treasury bills treasury Government Equity investments Other assets Fair Value of Financial Liabilities – of Financial Value Fair Held at Amortised Cost customers Deposits from Due to Banks Debt Securities Employee related liabilities related Employee Bills payable Creditors and accruals Creditors Interest payable on deposit Interest Interest payable on borrowing Interest Unpaid Dividend Other liabilities observable market data. nancial assets and liabilities value of fi Fair data. hierarchy to the following determined according nancial assets and liabilities are values of fi Fair for identical assets or liabilities. markets unadjusted quoted prices in active from those derived are 1 fair value measurements Level or quoted prices for identical similar instruments markets those with quoted prices for similar instruments in active 2 valuations are Level market observable. cant inputs are all signifi nancial instruments valued using models where and fi markets in inactive valuation, is not based on ect on the instrument’s cant eff a signifi at least one input, which could have those where 3 portfolios are Level observable

NMB Annual Report-2018/19 239 Notes to Financial Statements For the year ended 31 Ashad 2076 5.4 Operating Segment Information 2075 Ashad 1. General information a) An operating segment is a component of an entity: · that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), · whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete ﬁ nancial information is available. 2. Information about proﬁ t or loss, assets and liabilities

Particulars Province 3 Province 4 Province 5 Total

a Revenues from external customers 697,337,322 1,879,340,321 42,795,018 2,619,472,660 b "Intersegment revenues" 196,115,305 123,957,741 328,233 320,401,279 c Net Revenue 893,452,627 2,003,298,062 43,123,251 2,939,873,940 d Interest revenue 819,529,303 1,902,703,592 34,422,453 2,756,655,347 e Interest expense 664,350,634 1,194,276,124 25,164,620 1,883,791,377 f Net interest revenue 155,178,669 708,427,468 9,257,833 872,863,970 g "Depreciation and amortisation" 13,901,648 29,488,011 1,899,666 45,289,324 h Segment proﬁ t /(loss) 141,277,021 678,939,457 7,358,167 827,574,646 Entity"s interest in the proﬁ t or loss of i associates accounted for using equity method - j Other material non-cash items: - …………… - ………….. - k Impairment of assets 65,784,891 195,047,053 5,275,754 266,107,698 l Segment assets 5,369,142,453 18,411,298,921 638,668,551 24,419,109,925 m Segment liabilities 8,488,352,636 12,818,990,440 458,019,793 21,765,362,868

3. Measurement of operating segment proﬁ t or loss, assets and liabilities The Bank has determined segments based on the geographical region i.e. Province Wise.

4. Reconciliations of reportable segment revenues, proﬁ t or loss, assets and liabilities

(a) Revenue Total revenues for reportable segment 2,939,873,940 Other revenues - Elimination of intersegment revenues (320,401,279) Entity’s revenues 2,619,472,660

(b) Proﬁ t or loss

Total profi t or loss for reportable segments 827,574,646 Other profi t or loss (107,086,187) Elimination of intersegment profi ts - Unallocated amounts: (143,267,490) …………… ………….. Profi t before income tax 577,220,969

240 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076 (c) Assets

Total assets for reportable segments 24,419,109,925 Other assets - Unallocated amounts 733,227,680 Entity’s assets 25,152,337,606

(d) Liabilities

Total liabilities for reportable segments 21,765,362,868 Other liabilities - Unallocated liabilities 3,386,974,738 Entity’s liabilities 25,152,337,606

5. Information about geographical areas Revenue from following geographical areas

(a) Domestic 2,619,472,660 Province 1 - Province 2 - Province 3 697,337,322 Province 4 1,879,340,321 Province 5 42,795,018 Province 6 - Province 7 - (b) Foreign - Total 2,619,472,660

6. Information about major customers Revenue from a single external customer is less than 10 percent of bank’s total revenue.

NMB Annual Report-2018/19 241 Notes to Financial Statements For the year ended 31 Ashad 2076 5.4 Operating Segment Information 2076 Ashad 1. General information a) An operating segment is a component of an entity: · that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), · whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete ﬁ nancial information is available. 2. Information about proﬁ t or loss, assets and liabilities

Particulars Province 3 Province 4 Province 5 Total

a Revenues from external customers 1,142,901,044 2,256,556,990 121,395,683 3,520,853,717 b "Intersegment revenues" 330,919,421 147,284,490 - 478,203,912 c Net Revenue 1,473,820,466 2,403,841,480 121,395,683 3,999,057,629 d Interest revenue 1,083,961,306 2,596,044,079 111,856,006 3,791,861,391 e Interest expense 883,075,087 1,600,842,970 82,209,879 2,566,127,936 f Net interest revenue 200,886,219 995,201,110 29,646,127 1,225,733,455 g "Depreciation and amortisation" 15,355,316 37,810,580 4,270,802 57,436,698 h Segment proﬁ t /(loss) 244,470,641 617,903,440 34,915,002 897,289,083 Entity"s interest in the proﬁ t or loss of i associates accounted for using equity method - j Other material non-cash items: - k Impairment of assets 110,828,200 328,596,937 8,888,094 448,313,231 l Segment assets 6,174,643,351 16,272,686,284 964,949,967 23,412,279,603 m Segment liabilities 9,370,271,287 15,552,953,175 627,183,828 25,550,408,289

3. Measurement of operating segment proﬁ t or loss, assets and liabilities The Bank has determined segments based on the geographical region i.e. Province Wise.

4. Reconciliations of reportable segment revenues, proﬁ t or loss, assets and liabilities

(a) Revenue Total revenues for reportable segment 3,999,057,629 Other revenues - Elimination of intersegment revenues (478,203,912) Entity’s revenues 3,520,853,717

(b) Proﬁ t or loss

Total profi t or loss for reportable segments 897,289,083 Other profi t or loss 506,687,574 Elimination of intersegment profi ts Unallocated amounts: (683,790,709) …………… ………….. Profi t before income tax 720,185,949

242 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076 (c) Assets

Total assets for reportable segments 23,412,279,603 Other assets 3,709,939,344 Unallocated amounts 2,738,365,503 Entity’s assets 29,860,584,450

(d) Liabilities

Total liabilities for reportable segments 25,550,408,289 Other liabilities 70,989,702 Unallocated liabilities 4,239,186,459 Entity’s liabilities 29,860,584,450

5. Information about geographical areas Revenue from following geographical areas

(a) Domestic 3,520,853,717 Province 1 - Province 2 - Province 3 1,142,901,044 Province 4 2,256,556,990 Province 5 121,395,683 Province 6 - Province 7 - (b) Foreign - Total 3,520,853,717

6. Information about major customers Revenue from a single external customer is less than 10 percent of bank’s total revenue.

NMB Annual Report-2018/19 243 Notes to Financial Statements For the year ended 31 Ashad 2076 5.5 Share options and share based payment The bank does not have any share option and share based payment. 5.6 Contingent liabilities and commitment Contingent Liabilities: Where the Bank undertakes to make a payment on behalf of its customers for guarantees issued for which an obligation to make a payment has not arisen at the reporting date, those are included in these fi nancial statements as contingent liabilities Commitments: Where the Bank has confi rmed its intention to provide funds to a customer or on behalf of a customer in the form of loans, overdraﬅ s, future guarantees, whether cancellable or not and the Bank has not made payments at the reporting date, those instruments are included in these fi nancial statement as commitments Details of contingent liabilities and commitments are given in note 4.28 5.7 Related parties disclosures Following has been identifi ed as Related Parties for Bank under NAS 24 Related Parties: a. Directors b. Key Management Personnel of the Bank c. Relatives of Directors and Key Managerial Personnel

FY 2075-76 FY 2074-75 FY 2073-74

Directors Sushil Kumar Goshali Sushil Kumar Goshali Sushil Kumar Goshali Rajendra Kumar Batajoo Rajendra Kumar Batajoo Rajendra Kumar Batajoo Bijaya Malla Bijaya Malla Bijaya Malla Yogendra Lal Pradhan Yogendra Lal Pradhan Yogendra Lal Pradhan Shree Krishna Regmi Shree Krishna Regmi Shree Krishna Regmi Karma Kumari Gurung Karma Kumari Gurung Karma Kumari Gurung Pro. Dr. Yadab Prasad sharma Gaudel Niranjan Shrestha Niranjan Shrestha Rabindra Nath Bastola Rabindra Nath Bastola Pro. Dr. Yadab Prasad Sharma Gaudel Pro. Dr. Yadab Prasad Sharma Gaudel

Key Managerial Personnel Bishwo Mohan Adhikari Bishwo Mohan Adhikari Bishwo Mohan Adhikari Buddhi Kumar Malla Buddhi Kumar Malla Buddhi Kumar Malla Durga Ram Puri Durga Ram Puri Durga Ram Puri Krishna Raj Wagle Krishna Raj Wagle Krishna Raj Wagle

244 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076 Transaction during the Year

Particulars 2075-76 2074-75 2073-74

Directors Directors Sitting Fees 714,500 536,000 432,000 Interest Paid to directors on deposits 8,366,473 16,908,693 2,736,546 Other directors' expenses (if any) 159,044 134,336 - Total 9,240,017 17,579,029 3,168,546 Key Management Personnel Remuneration and Benefi t Paid 31,542,709 30,297,122 27,160,273 Post-Retirement Benefi ts 25,788,171 12,783,850 7,413,327 Other Long-term Benefi ts - - - Borrowing during the year - - - Interest on Borrowing - - - Interest on account balances 28,816 151,248 114,609 Other transactions benefi ts if any - - - Total 57,359,696 43,232,220 34,688,208

Reporting Date Balances

Particulars 2075-76 2074-75 2073-74

Directors Deposits 52,576,091 141,899,774 173,892,128 KMP Deposits 882,820 691,535 4,885,763 Borrowings - - - Other Receivable payables if any - - - Total 53,458,911 142,591,309 178,777,891

However a er the merger with NMB Bank Limited, the Board of Directors and Key Management personnels are dissolved. 5.8 Merger and acquisition The bank has not entered into any merger and acquisition activities in the reporting period. However, the Bank had signed Memorandum of Understanding dated 16 May 2019 with NMB Bank Limited (ODBL) to merge with it. Aﬅ er obtaining necessary regulatory approvals, both the Banks commenced joint operations from 28 September 2019 (11 Ashwin 2076) as NMB Bank Limited. NMB Bank Limited licensed as “A” class fi nancial institution by Nepal Rastra Bank in May 2008 has been operating in the Nepalese Financial market for over twenty three years and is one of the leading commercial banks in the banking industry. 5.9 Additional disclosures of non consolidated entities Not Applicable 5.10 Events a er reporting date. Bank monitors and assess events that may have potential impact to qualify as adjusting and / or non-adjusting events aﬅ er the end of the reporting period. All adjusting events are adjusted in the books with additional disclosures and non-adjusting material events are disclosed in the notes with possible fi nancial impact, to the extent ascertainable. There are no material events that have occurred subsequent to 31 Ashad 2076 till the signing of this fi nancial statement. However, as stated above the bank has already merged with NMB Bank Ltd. and is a non adjusting event.

NMB Annual Report-2018/19 245 Notes to Financial Statements For the year ended 31 Ashad 2076 5.11 Disclosure of eﬀ ect of transition from previous GAAP to NFRSs 5.11.1. Reconciliation of equity

"As at "As at 32.03.2075 Explanatory 01.04.2074 (End of last period "As at Particulars Note (Date of presented under 31.03.2076" Transition)" previous GAAP)"

Total equity under Previous GAAP 2,640,511,822 3,301,770,742 3,683,265,202 Adjustments under NFRSs: Impairment on loan and advances - - - Fair value & employees benefi t accounting of staff loan - - Lease accounting 1 (7,347,048) (11,870,443) (16,544,197) Measurement of investment securities measured at fair value 112,877,842 5,357,312 (1,665,406) Measurement of investment securities measured at fair value in associates 2 - - - Dividend Income from Associates - Revaluation of property & equipment - Recognition of Available for Sale Investment - 3,143,393 571,506 Recognition of investment property - Amortisation of debt securities issued - Deferred tax 3 (55,575,356) (39,984,371) 12,836,926 Defi ned benefi t obligation of employees 4 - - - Goodwill/Bargain purchase gain - Interest income 5 42,525,533 66,720,715 176,451,580 Proposed Dividend - - -

Total Adjustment to equity 92,480,972 23,366,605 171,650,409 Total Equity under NFRSs 2,732,992,794 3,325,137,347 3,854,915,611

246 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076 5.11.2. Reconciliation of proﬁ t or loss

" As at 32.03.2075 (End of last period Particulars Explanatory Note presented under " As at 31.03.2076" previous GAAP) "

Previous GAAP 373,754,997 381,494,460 Adjustments under NFRSs: Interest income 5 25,255,193 110,888,781 Impairment of loan and advances - - Employees benefi t amortisation under staff loan 7 (1,060,011) (1,157,915) Defi ned benefi t obligation of employee 4 - - Operating lease expense 1 (4,523,396) (4,673,754) Provision for Investment 8 22,004,644 2,046,519 Income from Investment in Associates 2 - - Gain on Sales of Share Investment Classifi ed to OCI 9 (6,315,534) (969,960) Current Tax on Gain on Sales of Share Investment Classifi ed to OCI 10 1,894,660 290,988 Dividend from Associates - - Amortisation expense of debt securities - - Other operating income - - Interest expense - - NBA provision 11 3,143,393 (2,571,887) Share Issue Expenses Directly Charged to Equity 12 4,915,070 - Share Issue Expenses Directly Charged to Equity-Tax Impact 13 (1,474,521) - Deferred Tax 3 (23,266,567) 50,100,526

Total Adjustment to proﬁ t or loss 20,572,930 153,953,297 Proﬁ t or loss under NFRSs 394,327,928 535,447,757 Other Comprehensive Income (90,667,622) (6,348,465) Total Comprehensive income under NFRSs 303,660,306 529,099,292

1) Rent Expenses booked over the rent period on equal amount on SLM Basis 2) Valuation made for associate company 3) Deferred Tax eff ect of all adjustment 4) Gratuity Expenses booked as per acturial valaution 5) Accrued Interest Receivable booked on accrual basis which in approximate to Eff ective Interest Rate 6) Liaiblity Created for Proposed Dividend Reversed 7) Interest on Staff loan charged to fi nance income and staff cost 8) Invsestment Provision made in P/L of local gaap reversed and charged to OCI for investment classifi ed as Fair value through OCI 9) Gain on Sell of share classifi ed to OCI charged directly to equity 10) Tax eff ect of Gain on Sell of share classifi ed to OCI charged directly to equity 11) NBA has been directly shown through Regulatory reserve 12) Avoidable Share issue expenses directly charged to equity 13) Tax eff ect of Avoidable Share issue expenses directly charged to equity

NMB Annual Report-2018/19 247 ------4,384,560 26,903,428 18,073,481 56,547,931 568,088,484 919,797,104 184,187,635 per NFRS Amount as 4,573,597,783 1,148,397,928 22,360,606,116 29,860,584,450 ------5,555,032 4,384,560 NFRS 26,903,428 12,836,926 Eff ect of Eff 283,474,007 188,194,606 Transition to Transition (144,959,347) As at 31.03.2076 ------5,236,555 GAAP Previous Previous 568,088,484 914,242,072 184,187,635 201,507,277 4,573,597,783 1,148,397,928 22,077,132,109 29,672,389,844 ------6,213,148 47,551,242 122,826,450 854,763,271 211,158,529 per NFRS Amount as 4,606,754,593 1,122,470,190 18,180,600,184 25,152,337,606 ------6,213,148 NFRS 12,772,394 40,612,508 Eff ect of Eff 208,395,829 (34,608,911) Transition to Transition (152,159,953) ------presented under previous GAAP) under previous presented As at 32.03.2075 (End of last period GAAP 34,608,911 Previous Previous 841,990,876 122,826,450 211,158,529 199,711,194 4,606,754,593 1,122,470,190 17,972,204,355 25,111,725,098 ------5,083,341 33,726,450 42,607,951 Opening 800,622,192 794,100,017 156,186,157 NFRS SFP 3,363,268,270 13,948,256,529 19,143,850,907 ------5,083,341 NFRS Eff ect of Eff 141,426,683 116,981,531 (15,794,522) (108,088,180) Transition to Transition 139,608,852.84 ------GAAP As at 01.04.2074 (Date of Transition) As at 01.04.2074 (Date of Transition) 33,726,450 15,794,522 Previous Previous 800,622,192 677,118,486 156,186,157 150,696,131 3,363,268,270 13,806,829,846 19,004,242,054 1 2 3 4 5 6 7 Note" "Explanatory Assets 5.11.3. Eff ect of NFRSs adoption for the statement of fi nancial position ect of NFRSs adoption for the statement fi 5.11.3. Eff Particulars Cash and Equivalents Bank Nepal Rastra Due from Placement with Bank and Financial Institutions Derivative Financial Instruments Financial Derivative Other Trading Assets Other Trading Loans and Advances to Customers Securities Investment Loans and Advances to BFIs Assets Tax Current in Subsidiaries Investment Investment in Associates Investment Investment Property Investment Property and Equipment Property Goodwill and Intangible Assets Assets Tax Deferred Other Assets Total Assets Total Notes to Financial Statements Notes to Financial ended 31 Ashad 2076 For the year

248 www.nmbbanknepal.com ------28,614,713 356,519,924 548,909,519 762,155,780 per NFRS Amount as 1,496,132,384 2,515,235,600 3,854,915,611 3,854,915,611 24,153,016,531 26,005,668,839 29,860,584,450 ------NFRS 16,544,197 16,544,197 Eff ect of Eff 250,000,000 282,044,422 171,650,409 171,650,409 188,194,606 Transition to Transition (250,000,000) (110,394,013) As at 31.03.2076 ------GAAP 28,614,713 Previous Previous 250,000,000 339,975,726 659,303,532 480,111,357 1,246,132,384 2,515,235,600 3,683,265,202 3,683,265,202 24,153,016,531 25,989,124,642 29,672,389,844 ------5,375,460 13,522,470 28,614,713 599,112,852 353,110,962 312,881,810 468,405,224 per NFRS Amount as 2,515,235,600 3,325,137,347 3,325,137,347 20,856,078,516 21,827,200,259 25,152,337,606 ------5,375,460 to NFRS Eff ect of Eff 11,870,443 17,245,903 35,072,738 23,366,605 23,366,605 40,612,508 Transition Transition (11,706,133) ------presented under previous GAAP) under previous presented GAAP As at 32.03.2075 (End of last period 13,522,470 28,614,713 Previous Previous 599,112,852 341,240,518 277,809,072 480,111,357 2,515,235,600 3,301,770,742 3,301,770,742 20,856,078,516 21,809,954,356 25,111,725,098 ------8,355,564 39,780,834 15,372,574 Opening 614,140,643 301,292,494 376,762,827 462,160,406 NFRS SFP 1,878,696,987 2,732,992,794 2,732,992,794 15,447,288,578 16,410,858,113 19,143,850,906 ------NFRS 7,347,048 39,780,834 47,127,882 15,372,574 78,961,488 92,480,972 92,480,972 Eff ect of Eff 376,254,209 139,608,853 Transition to Transition (378,107,300) ------508,618 8,355,564 GAAP As at 01.04.2074 (Date of Transition) As at 01.04.2074 (Date of Transition) Previous Previous 614,140,643 293,945,446 383,198,918 2,256,804,287 2,640,511,822 2,640,511,822 15,447,288,578 16,363,730,231 19,004,242,053 8 9 10 11 12 13 Note" "Explanatory Liabilities Due to Bank and Financial Institutions Due to Bank and Financial Due to Nepal Rastra Bank Due to Nepal Rastra Derivative Financial Instruments Financial Derivative Deposits from Customers Deposits from Borrowings Current Tax Liabilities Tax Current Provisions Deferred Tax Liabilities Tax Deferred Other Liabilities Debt Securities Issued Subordinated Liabilities Subordinated Total Liabilities Total Equity Capital Share Share Premium Share Retained Earnings Reserves Total Equity Attributable to Total Holders Non Controlling Interest Non Controlling Equity Total Total Liabilities and Equity Total Notes to the Financial Statements Notes to the Financial ended 31st Ashad, 2076 For the year Note ed to loans and advances customers. loan reclassifi value of staff on accrual basis and present on loans booked 1) Accrued interest securities. ed as investment on bond reclassifi interest at FV and accured securiies recognized 2) Investment at fair value. ed and measured reclassifi Property 3) Investment property. ed as Investment Asset reclassifi 4) Fixed to goodwill and intangible assets. cation of expenses not written off 5) Reclassifi ect of all adjustment eff Tax 6) Deferred on loans and advances. interest and accured loan, expenses not written off cation of staff ect of reclassifi 7) Eff Deposit Fixed cation of matured 8) Reclassifi as per actuarial valuation. liability booked period on equal amount SLM Basis and gratuity the rent over 9) Rent Expenses booked dividend. and proposed bonus share of proposed ect of reversal 10) Eff premium. share from bonus share of proposed ect of reversal 11) Eff t due to adjustments of NFRS. ect on profi 12) Eff premium share from bonus share ect of proposed 13) Eff

NMB Annual Report-2018/19 249 Notes to Financial Statements For the year ended 31 Ashad 2076 5.11.4. Eff ect of NFRSs adoption for statement of profi t or loss and other comprehensive income As at 32.03.2075 (End of last period presented " under previous GAAP) Particulars Explanatory Note " Eff ect of Transition Amount as per Previous GAAP to NFRS NFRS Interest Income 1 2,411,003,805 25,255,193 2,436,258,999 Interest Expense 2 (1,563,395,029) - (1,563,395,029) Net Interest Income 847,608,777 (25,255,193) 872,863,970 Fee and Commission Income 173,888,506 - 173,888,506 Fee and Commission Expense - 2,777,672 2,777,672 Net Fee and Commission Income 173,888,506 2,777,672 171,110,835 Net Interest, Fee and Commisson Income 1,021,497,283 (22,477,522) 1,043,974,805 Net Trading Income - 127,734 127,734 Other Operating Income 3 15,628,290 (6,443,268) 9,185,022 Total Operating Income 1,037,125,573 (16,161,987) 1,053,287,560 Impairment Charge/ (Reversal) for Loans and Other Losses 4 72,047,472 (25,148,036) 46,899,435 Net Operating Income 965,078,101 (41,310,024) 1,006,388,125 Operating Expense Personnel Expenses 5 245,864,095 1,060,011 246,924,107 Other Operating Expenses 6 150,038,303 (13,072,178) 136,966,125 Depreciation & Amortisation 7 35,386,492 9,902,832 45,289,324 Operating Profi t 533,789,210 (43,419,358) 577,208,569 Non Operating Income 12,400 - 12,400 Non Operating Expense - - - Profi t Before Income Tax 533,801,610 (43,419,358) 577,220,969 Income Tax Expense Current Tax 8 178,861,002 (420,139) 178,440,863 Deferred Tax 9 (18,814,389) 23,266,567 4,452,178 Profi t for the Period 373,754,997 (20,572,930) 394,327,928 - (0) Other Comprehensive Income, Net of Income Tax a) Items that will not be reclassifi ed to profi t or loss • Gains/(losses) from investment in equity instruments measured at fair value 10 - (129,525,174) (129,525,174) • Gains/(losses) on revaluation - - - • Acturial gain/(losses) on defi ned benefi t plans 11 - - - • Income tax relating to above items 12 - 38,857,552 38,857,552 Net other comprehensive income that will not be reclassifi ed to profi t or loss - (90,667,622) (90,667,622) b) Items that are or may be reclassifi ed to profi t or loss • Gains/(losses) on cash fl ow hedge - - - • Exchange gains/(losses)(arising from translating fi nancial assets of foreign operation) - - - • Income tax relating to above items - - - • Reclassify to profi t or loss - - - Net other comprehensive income that are or may be reclassifi ed to profi t 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 - (90,667,622) (90,667,622) Total Comprehensive Income for the Period 373,754,997 (111,240,552) 303,660,306 Notes 1) Interest Receivable on loan has been booked on accrual basis and interest diff erence in staff loan has also been charged. 2) Interest expense on calculation of Gratuity expense - 3) Profi t on sale of investment has been reclassifi ed 4) Reversal of Loan loss provision 5) Bonus has been charged as staff expense and fi nance cost of staff loan has also been charged. 6) Rent expense has been charged on SLM basis 7) Reclassifi cation of written off expense as depreciation and ammortization 8) Income tax related to share issue expense and gain on sale of investment reclassifi ed through equity. 9) Deferred Tax eff ect of all adjustment 10) Changes in Fair value and cost of investment classifi ed to OCI 11) Actuarial Gain/ loss recognized in OCI of Gratuity Liability 12) Deferred Tax Adjustment on item of OCI

250 www.nmbbanknepal.com Notes to Financial Statements For the year ended 31 Ashad 2076 5.11.5. Eﬀ ect of NFRSs adoption for statement of cash ﬂ ows

As at 32.03.2075 "Explanatory Particulars Note" Eff ect of Previous GAAP Transition to Amount as per NFRS NFRS Net cash fl ows from operating activities 1 1,523,058,476 (281,518,977) 1,241,539,499 Net cash fl ows from investing activities 2 (245,228,078) (39,975,831) (285,203,909) Net cash fl ows from fi nancing activities 287,503,922 (457,897) 287,046,026 Net increase/(decrease) in cash and cash equivalent 1,565,334,321 (321,952,706) 1,243,381,615 Eff ect of exchange rate fl uctuations on cash and cash equivalents held - 104,709 104,709 Cash and cash equivalent at the beginning of the period 3 4,163,890,461 (800,622,192) 3,363,268,270 Cash and cash equivalent at the end of the period 5,729,224,782 (1,122,470,189) 4,606,754,593 Notes 1) Money at call treated as cash and cash equivaluents in NFRS, Investment securties classifi ed as investment activity in NFRS 2) Investment securties classifi ed as investment activity in NFRS 3) Money at Call treated as Cash and Cash Equivalents

NMB Annual Report-2018/19 251 1 53 19 440 9.25 21.29 0.00% 0.00% 8.14% 0.11% 2.29% 1.79% 1.75% 1.14% 5.06% 1.31% 4.93% 197.00 153.26 15.21% 14.17% 58.13% 25.95% 90.92% 13.77% 14.91% 11.19% FY 25,152,356 2075/076 1 - 53 19 413 9.23 19.50 0.00% 0.00% 7.29% 0.13% 2.12% 1.57% 1.48% 1.16% 5.06% 0.52% 4.97% 132.20 180.00 15.05% 13.12% 57.16% 24.02% 85.58% 17.14% 18.30% 12.62% FY 25,152,356 2074/075 - 41 17 317 23.99 26.22 0.00% 0.02% 2.81% 2.08% 1.24% 1.08% 5.06% 0.90% 4.89% 145.47 8.26.% 629.00 22.94% 17.69% 13.51% 49.62% 32.52% 87.54% 17.69% 18.77% 11.43% FY 18,786,970 2073/074 25 220 30.83 20.43 0.00% 5.49% 0.00% 3.27% 2.38% 0.93% 0.93% 5.20% 0.78% 8.35% 6.31% 119.65 630.00 28.85% 29.20% 12.07% 52.40% 31.85% 83.75% 13.87% 14.80% FY 10,528,495 2072/073 - 18 129 9.86 32.97 1.01% 6.73% 0.00% 3.71% 2.63% 1.95% 0.90% 5.33% 0.54% 9.66% 6.36% 149.77 325.00 27.05% 20.26% 13.09% 52.76% 36.84% 82.14% 13.50% 14.40% FY 4,681,600 2071/072 Rs. Rs. Rs. Ratio Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Number Number Number Number Number Indicators Percent of Net Profi t/Gross Income t/Gross of Net Profi Percent Earnings Per Share (Restated for previous years) (Restated for previous Earnings Per Share Market Value Per Share Value Market Price Earnings Ratio Dividend (including bonus) on Share Capital Dividend (including bonus) on Share Cash Dividend on Share Capital Cash Dividend on Share Interest Income/Loan & Advances Interest Staff Expenses/Total Operating Expenses Operating Expenses/Total Staff Interest Expenses on Total Deposit and Borrowing Expenses on Total Interest Exchange Gain/Total Income Exchange Gain/Total Staff Bonus/Total Staff Expenses Staff Bonus/Total Staff Net Profi t/Loan and Advances Net Profi Net Profi t/Total Assets t/Total Net Profi Total Credit/Deposit Total Total Operating Expenses/Total Assets Expenses/Total Operating Total Adequacy of Capital Fund on Risk Weighted Assets Adequacy of Capital Fund on Risk Weighted Capital a) Core b) Supplementary Capital c) Total Capital Fund c) Total Liquidity (CRR) Non-performing credit/Total credit Non-performing credit/Total Base Rate Weighted Average Interest Rate Spread Interest Average Weighted Book Net-worth Per Share Total Shares Total Total Staff Staff Total Others a) No of Branches b) No Branchless Banking b) No Branchless c) No of ATMs 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 5.11.6 Principal Indicators for Five Years 5.11.6 Principal Indicators for Five Particulars Notes to Financial Statements Notes to Financial ended 31 Ashad 2076 For the year

252 www.nmbbanknepal.com Amendments to the MOA and AOA of the Bank presented as a special resolution in the General Meeting dated 9 January 2020

Article/ Justiﬁ cation to the Existing Arrangements Proposed Arrangements Section Amendment On the MOA Side

The issued capital of the Bank shall be NPR 11,529,741,707.96 (in words: The issued capital of the Bank shall be NPR Eleven Billion Five Hundred Twenty 13,950,987,466.96 (in words: Thirteen Billion Nine As per the proposal Nine Million Seven Hundred Forty One Hundred Fiﬅ y Million Nine Hundred Eighty Seven made on 24th Annual Thousand Seven Hundred Seven and Thousand Four Hundred Sixty Six and 96/100 only). General Meeting of the 6(b) 96/100 only). This capital is divided With face value of NPR 100 per share, the capital is Bank to distribute 21% into 115,297,417.07 (in words: One divided into 139,509,874.66 (in words: One Hundred bonus share on existing Hundred Fiﬅ een Million Two Hundred Thirty Nine Million Five Hundred Nine Thousand Eight paid-up capital Ninety Seven Thousand Four Hundred Hundred Seventy Four and 66/100) units of shares. Seventeen and 07/100) units of shares with face value of NPR 100 per share.

The issued capital of the Bank shall be NPR 13,950,987,466.96 (in words: Thirteen Billion Nine As per the proposal The paid-up capital of the Bank shall be Hundred Fiﬅ y Million Nine Hundred Eighty Seven made on 24th Annual NPR 11,529,741,707.96 (in words: Eleven Thousand Four Hundred Sixty Six and 96/100 only). General Meeting of the 6(c) Billion Five Hundred Twenty Nine Million With face value of NPR 100 per share, the capital is Bank to distribute 21% Seven Hundred Forty One Thousand divided into 139,509,874.66 (in words: One Hundred bonus share on existing Seven Hundred Seven and 96/100 only). Thirty Nine Million Five Hundred Nine Thousand Eight paid-up capital Hundred Seventy Four and 66/100) units of shares.

On the AOA Side

The Bank shall have a board committee of 7 members- 3 representatives from promoter The Bank shall have a 7 member board shareholder category including one director To ensure the committee consisting of three elected nominated by Nederlandse Financierings- representation of foreign 27(2) representatives from both promoter Maatschappij Voor Ontwikkelingslanden N.V. (FMO), investor on Board of and public shareholders and one Nederland and two elected directors, three elected Directors independent director. representatives from public shareholder category and one independent director.

Per meeting allowance received by Due to the time relative Per meeting allowance received by the Chairman and the Chairman and other Directors necessity to increase the 32(b) other Directors shall be NPR 18,000 and NPR 16,000 shall be NPR 13,000 and NPR 12,000 allowance received by the respectively. respectively. board of directors

Existing Arrangements Facility of Food Expenses Designation/Expense Area-1 Area-2 Area-3 Area-4 Area-5 Heading (USD) (USD) (USD) (INR) (NPR)

Chairman (Food Expenses) 165.00 110.00 99.00 2,200.00 2,200.00 Need for linguistic Directors (Food Expenses) 143.00 99.00 88.00 1,650.00 1,650.00 improvement and time- 32(c) (iii) relative growth of daily Proposed Amendments Daily Travelling Allowance travelling allowance observed Designation/Expense Area-1 Area-2 Area-3 Area-4 Area-5 Heading (USD) (USD) (USD) (INR) (NPR)

Chairman 250.00 250.00 200.00 11,000.00 11,000.00

Directors 225.00 225.00 175.00 10,000.00 10,000.00

Without increasing the amount limit mentioned in sub-clauses (i) and (ii), hotel and food expense shall be Except as mentioned in sub-clauses (i) and (ii), air Need for linguistic reimbursed as per the bill and other tickets, passport and visa fee, communication and improvement and 32(c) (v) expenses not mentioned such as transportation required during visit shall be inquired consideration of practical travel ticket, passport and visa fee, according to actual bill. aspects observed communication and transportation, etc. shall be reimbursed as per actual bill

NMB Annual Report-2018/19 253 Notice about 24th Annual General Meeting

The 396th Board Meeting of the Bank held on 10 December 2019, has decided to conduct 24th Annual General Meeting in the following date, venue and time to discuss upon the following agenda. This notice is published to inform all our esteemed shareholders regarding the Annual General Meeting as per Clause 67 of Company Act, 2006.

1. Date, Venue and Time of the Annual General Meeting Date : Thursday, 9 January, 2020 Venue : Nepal Administrative Staﬀ College, Lalitpur Time : 10:00 A.M.

2. Agenda of the Meeting

A. General Agenda

i. To discuss and approve the annual report presented by the Chairman on behalf of the Board of Directors,

ii. To discuss and approve the Auditor’s report for FY 2018/19 including Balance Sheet, Profi t and Loss Statement, Cash Flow Statement, and other fi nancial reports (including consolidated fi nancials of subsidiary companies and fi nancial reports of erstwhile Om Development Bank Ltd.),

iii. To appoint and decide upon the remuneration of the Auditor for ﬁ scal year 2019/20 in compliance with the Clause 111 of Company Act, 2006 and Clause 63 of Bank and Financial Institution Act 2016, (existing Auditor MS. S.R. Associates, Chartered Accountant is eligible for reappointment)

iv. To approve the appointment of auditor for ﬁ nancial audit of erstwhile Om Development Bank Ltd. until September 27 of the FY 2019/20.

v. To approve the distribution of 14 percent cash dividend (including for tax purpose) amounting NPR 1,614,163,839.11 (in words: Rupees One Billion Six Hundred Fourteen Million, One Hundred Sixty Three Thousand, Eight Hundred Thirty Nine and 11/100 only) of the existing paid-up capital of NPR 11,529,741,707.96 (in words: Rupees Eleven Billion Five Hundred Twenty Nine Million Seven Hundred Forty One Thousand Seven Hundred Seven and 96/100 only) as proposed by the Board of Directors.

B. Special Agenda

i. To approve the increment in the existing issued capital from NPR 11,529,741,707.96 (in words: Rupees Eleven Billion Five Hundred Twenty Nine Million Seven Hundred Forty One Thousand Seven Hundred Seven and 96/100 only) to NPR 13,950,987,466.96 (in words: Rupees Thirteen Billion Nine Hundred Fiﬅ y Million Nine Hundred Eight Seven Thousand Four Hundred Sixty Six and 96/100 only)

ii. To approve the distribution of 21 percent bonus share of existing paid-up capital amounting to NPR 2,421,245,759 (in words: Rupees Two Billion Four Hundred Twenty One Million Two Hundred Forty Five Thousand Seven Hundred Fiﬅ y Nine only) to adjust the eﬀ ect of proposed increment in issued capital

254 www.nmbbanknepal.com iii. To approve the amendment of Memorandum of Association of the Bank with respect to the increment of its issued and paid-up capital. (Related details are included in the Annual Report)

iv. To approve the amendment of the Article of Association of the Bank (Related details are included in the Annual Report)

v. To provide authority to the Board of Directors to acquire other banks and ﬁ nancial institutions and to carry out merger process with other banks and ﬁ nancial institutions, and to delegate authority to carry out the tasks related to the appointment of the Appraiser/Valuator for the same

vi. To provide authority to the Board of Directors to carry out or cause to carry out tasks related to amendment in the Memorandum of Association and Article of Association of the Bank such as record keeping, making minor changes, certiﬁ cation of the documents, registration and receipt of acknowledgement of the record.

C. Miscellaneous

D. Regarding Election

i. To conduct election to appoint six directors with 3 each representing from public shareholders and promoter shareholders

By Order Company Secretary

Additional Information about the Annual General Meeting (AGM)

1. Share register shall remain closed from 2076/09/04 B.S. (20/12/2019 A.D.) to 2076/09/24 B.S. (09/01/2020) for the purpose of this AGM.

2. A brief annual ﬁ nancial statement is published along with this notice for shareholders’ information. Further, all the proposals presented at the AGM along with brief ﬁ nancial statements are also kept on the Bank’s website www.nmbbanknepal.com.np

3. Shareholders interested in participating at the AGM are required to bring either an original copy of Share Certiﬁ cate or Demat account details and documents proving their identity with photograph or its copy along with them.

4. Shareholders attending the AGM must be present in the AGM venue and sign the attendance register that will be made available from 09:00 A.M. onwards.

5. Shareholders willing to nominate proxy to attend the AGM, shall register proxy form at the Bank’s head oﬃ ce Babarmahal, Kathmandu, at least 48 hours before the AGM commences.

NMB Annual Report-2018/19 255 6. Only existing shareholders shall be nominated proxy. If any shareholder aﬅ er appointing proxy is self-present in the AGM, then such proxy shall be automatically cancelled.

7. In case of minor or insane shareholders, person registered as his/her guardian in the share register book shall be entitled to take part, vote or appoint a proxy in the AGM. In case of joint shareholdings, only the unanimously selected representative or the partner whose name appears ﬁ rst in the serial order of the share register book can attend the AGM.

8. Any issue or query raised in the AGM shall be responded by Chairman or any other dignitaries as permitted by the Chairman.

9. If any shareholder has any issue or query about the Bank, shareholders are requested to send it in writing to the Bank’s registered orrice at least 7 days before the AGM commences. However, such issues or queries shall not be tabled for discussion as agenda in the AGM.

10. Except for documents related to AGM, shareholders are kindly requested not to carry any bags and luggage while attending the AGM.

Additional Information on Election of Members of Board of Directors

1. The programs related to the election will be as per the notice published by the Election Offi cer. The election program will be published by the Election Offi cer on 2076/09/10 B.S. (26/12/2019 A.D.) Thursday 1 PM at the Bank’s central offi ce Babarmahal, Kathmandu.

2. The shareholder willing to be a candidate for the post of Director must have owned at least 100 units mortgage free shares of any type issued by the Bank.

3. The shareholder willing to be a candidate for the post of Director will have to register his candidacy in the prescribed format within the date and time mentioned in the notice of the election program published at Bank’s central oﬃ ce, ward number 11, NMB Bhawan, Babarmahal, Kathmandu. The candidacy must be proposed by one ordinary shareholder of the Bank and seconded by another shareholder as supporter.

4. Shareholders can purchase Directors’ “Election Guidelines 2065” by paying a fee of NPR 200 from the central oﬃ ce of the Bank

NOTE: For shareholders’ convenience, Annual Report has been uploaded in Bank’s website (https://www.nmbbanknepal.com.np) wherein shareholders can browse and access the report online.

256 www.nmbbanknepal.com