Kathmandu: Nepal Rastra Bank governor Dr Bishwanath Paudel has highlighted the significant impact that increasing bad loans in agriculture and small and medium enterprises are having on banks and financial institutions.
According to National News Agency Nepal, Governor Paudel pointed out that simply introducing monetary policy focusing on large entrepreneurs and businesses will not solve this issue. Speaking at a pre-monetary policy discussion programme organized by the Society of Economic Journalists (SEJON), he mentioned that preparations are underway to introduce monetary policy for the upcoming fiscal year 2082/83, with a concentrated focus on agriculture and small and medium enterprises. Governor Paudel emphasized the need to address the growing problem of bad loans in these sectors, stating that during times of instability, all sectors are affected, and efforts should be made to support all, rather than just benefiting wealthier groups.
Senior vice president of the Confederation of Banks and Financial Institutions (CBFIN) Nepal, Rajesh Upadhyay, explained that the main reason for the inability to increase loans, despite a decrease in interest rates, is the decline in disposable income. Upadhyay noted that increased expenses coupled with stagnant income and reduced consumption due to youth migration have contributed to this issue. He stressed the need for timely guidelines for working capital loans, highlighting that the increase in bad loans has become a social issue, not just a banking problem.
Former Chief Secretary Dr Baikuntha Aryal argued that although the government claims to have implemented expansionary fiscal policies, the private sector is still grappling with issues due to a lack of policy stability. He noted that while reforms such as widening the tax base have been introduced, the absence of stable policies remains a concern.
Similarly, former president of the FNCCI, Shekhar Golchha, underscored the necessity of boosting the morale of the private sector through the forthcoming monetary policy.
Santosh Koirala, president of the Nepal Bankers’ Association, emphasized the need for the establishment of a robust asset management company. He remarked that banks currently function as asset management entities, but a more powerful and authorized entity is needed to address the problems effectively.