Kathmandu, Aug. 17 -- Nepal's commercial banks recorded a 32 percent increase year-on-year in net profit in the last fiscal year, despite weak economic activity, sluggish credit demand and a sharp rise in excess liquidity in the banking system.

According to unaudited financial statements published by the country's 20 commercial banks, their combined net profit rose to Rs69.78 billion in the fiscal year ended mid-July, from Rs52.79 billion a year earlier.

Bankers say the increase was driven largely by stronger loan recoveries in the fourth quarter, which allowed banks to reverse some impairment charges and reduce provisioning for potential loan losses.

The rise in profits comes as the wider economy continues to face weak demand. For the...