9th January 2024, Kathmandu
The Nepal Bankers’ Association (NBA) recently held a high-level meeting with the International Monetary Fund (IMF) mission team, led by Mission Chief Ms. Sarwat Jahan, as part of the 5th Review under the Extended Credit Facility (ECF).
NBA and IMF Discuss Financial Sector Trends
The discussions focused on analyzing key trends in Nepal’s financial sector, exploring growth opportunities, addressing regulatory challenges, and strengthening the banking ecosystem to support economic recovery.
Key Highlights of the Meeting
Current Banking Landscape in Nepal
NBA President Mr. Santosh Koirala provided a comprehensive overview of the Nepali banking sector, outlining its challenges and opportunities. He emphasized the pressing issue of low credit growth, attributing it to a lack of confidence among entrepreneurs. Mr. Koirala urged the Government of Nepal to take proactive steps to restore confidence in the business community and encourage credit demand.
Challenges Faced by the Banking Sector
NBA Executive Committee members elaborated on several critical challenges hindering sectoral growth, including:
Land Ceiling Issues: Restrictive policies affecting collateral availability.
Rising Non-Performing Loans (NPLs): A growing concern for financial stability.
Directed Sector Lending: Meeting mandatory lending quotas remains a significant hurdle.
Policy Uncertainty: Frequent policy shifts dampen investor confidence.
Bond Market Development: The an urgent need to establish robust capital markets to diversify funding sources.
IMF’s Perspective on Nepal’s Economic Growth
The IMF mission team recognized Nepal’s untapped economic potential and emphasized the necessity of achieving a consistent 5-6% economic growth rate to unlock sustainable development. The team also highlighted the importance of structural reforms and strategic investments to enhance economic resilience.
Addressing Growth Barriers
To address low credit growth and other systemic issues, the meeting highlighted the need for:
Collaborative Policy Formulation: A unified effort between the government, regulators, and financial institutions.
Entrepreneurial Confidence Building: Initiatives to support SMEs and startups through favorable policies and access to finance.
Infrastructure Development: Prioritizing investment in physical and digital infrastructure to boost productivity.
Financial Market Expansion: Developing the bond market and alternative financing instruments to diversify credit options.
A Pathway to Economic Resilience
The NBA-IMF meeting served as a vital platform for dialogue between Nepal’s banking sector and international financial experts. By exchanging insights on local and global financial trends, both parties identified actionable strategies to foster sustainable growth.
Conclusion
As Nepal navigates post-pandemic recovery, collaboration between key stakeholders, such as the NBA, IMF, and the Government of Nepal, will play a critical role in addressing systemic challenges and driving economic transformation. The insights gained from this meeting are expected to guide reforms that strengthen the banking sector and accelerate Nepal’s journey toward financial stability and prosperity.
For more: NBA and IMF Discuss Financial Sector
