What it is
Gross NPL counts every overdue loan. But the bank has already set aside provisions for some of that. Net NPL subtracts those provisions and shows what is still exposed.
If gross NPL is 4% and the bank has provisioned three-quarters of it, net NPL is about 1%. The remaining 1% is the part that could still hit future profit.
A net NPL close to zero means the bank has already absorbed the losses in past profits. A wide gap between gross and net means heavy provisioning has been done, which is prudent.
How it is calculated
Net NPL (%) = (Non-performing loans − Loan loss provision on NPL) ÷ (Total loans − Loan loss provision) × 100.
Worked on Nabil Bank Limited, FY 2082/83 Q4
NABIL's net NPL was 0.58% at the end of FY 2082/83 Q4, against a gross NPL of 4.20%. The gap is the provisioning already charged to profit.
What good looks like
Lower is better. The healthiest reading is a modest gross NPL with a net NPL near zero; it means problems are recognised and paid for.
Watch out
- Exact definitions vary slightly between filers; compare within one bank over time.
- A low net NPL can also come from aggressive write-offs rather than recovery.
- Net NPL rises first when new loans turn bad, because fresh NPLs start with only partial provision.
In Nepal
Both gross and net NPL appear in NRB's quarterly ratio schedule for BFIs. NRB's published definition nets loan loss provision against NPL; the precise form of the denominator is not spelled out in public sources Punji could verify, so compare the figure as each bank reports it.
Questions
Because the bank has already set aside provisions for most of the bad loans. Net NPL counts only what is still uncovered.
Yes, if total provisions exceed non-performing loans. The bank has then set aside more than its current bad loans.