Nabil Bank CEO Says AMC Alone Won’t Eliminate Banks’ Bad Loans
29th June 2026, Kathmandu
Nabil Bank CEO Manoj Gyawali has stated that the establishment of an Asset Management Company should not be viewed as a complete solution to the banking sector challenges of Nepal.
Nabil Bank CEO Statement
He clarified that an AMC will not automatically purchase all non-performing assets from banks or eliminate bad loans overnight. His public commentary brings a grounded perspective to a major economic debate regarding financial reforms and institutional restructurings currently taking place inside the national regulatory framework.
The discussion around setting up a centralized public or private asset corporation has intensified as commercial banking institutions deal with changing asset metrics. However, the executive steering team at Nabil Bank emphasizes that relying entirely on a separate entity to take over toxic assets creates false stability expectations. True financial recovery requires systemic upgrades in risk assessment alongside targeted operational support for distressed commercial debtors.
Defining the True Operational Scope of an Asset Management Company
According to Gyawali, the primary role of an AMC is to assess the commercial viability of distressed businesses, restructure operations, improve financial management and cash flow, and, where necessary, take over the management of troubled companies. An AMC acts as a corporate turnaround specialist rather than a simple financial garbage bin where banks dump failed credit lines. The objective is to salvage underlying business value rather than wipe the slate clean through continuous write offs.
He stressed that neither do banks expect the AMC to absorb all bad assets nor would it have the capacity to manage such a massive volume. If an enterprise lacks fundamental market value or a sustainable operating strategy, transferring its debt to an independent entity changes the ownership structure without fixing the structural insolvency. Real systemic progress happens when corporate managers work collaboratively with lenders to fix real world productivity issues.
Assessing South Asian Banking Metrics and Non Performing Asset Realities
Gyawali also cautioned that adopting overly punitive government policies toward distressed borrowers could further complicate the recovery process. While acknowledging that the banking sector of Nepal faces near term operational challenges, he rejected claims that rising bad loans have pushed banks into an institutional crisis. It is critical to analyze national performance metrics relative to international standards before reaching negative conclusions.
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He noted that the non-performing asset ratio of Nepal of around 5.6 percent, though higher than in previous years, remains among the lowest in South Asia. He cited significantly higher levels in countries such as Pakistan, Sri Lanka, and Bangladesh to illustrate his point. This comparative stability shows that the commercial banking network of Nepal possesses strong foundational health and is resilient enough to handle macroeconomic stress.
Protecting Depositor Safety Through Strict Central Bank Regulations
The executive leader highlighted the rigorous security checks established by the central banking authority to maintain long term financial safety. The CEO emphasized that Nepal Rastra Bank maintains strict loan classification and provisioning standards, requiring banks to make provisions even for performing loans, which helps safeguard depositors. This proactive provisioning buffer ensures that potential future losses are pre-funded out of current profits.
These strict reserve rules act as a massive shield protecting public savings accounts from systemic credit contagion. He assured the general public that the money of depositors remains completely secure and is not at risk. The highly conservative management style forced by regional apex regulators ensures that commercial operations maintain ample capital adequacy buffers to cushion against unexpected industrial defaults.
External Catalysts Driving the Recent Elevation in Bank Loan Defaults
Gyawali attributes the recent increase in non-performing assets largely to external factors rather than deep internal credit underwriting failures. These macro disruptions include the cooperative sector crisis, a sharp decline in public trust affecting informal lending and traditional family repayments, and a prolonged slowdown in the real estate market that has limited the ability of borrowers to repay loans through quick property sales.
Historically, real estate liquidations served as a primary emergency backup for businesses facing short term liquidity crunches. With the land trading market remaining slow, standard collateral liquidation paths are restricted, forcing numbers upward on balance sheets. Recognizing these temporary external constraints allows banking networks and national policymakers to build balanced recovery strategies that support business survival while maintaining absolute institutional safety.
For More: Nabil Bank CEO Statement
