Bankers Urge Finance Minister to Avoid Crackdowns on Both Borrowers and Lenders

July 3, Kathmandu – In a three-hour meeting on Tuesday with Finance Minister Dr. Swarnim Wagle, bankers emphasized the need to foster an environment without crackdowns on either lending or borrowing, noting that such an environment would encourage loan growth. The bankers urged seriousness in improving the business environment.

When the Finance Minister questioned why loan demand had not increased despite lower interest rates, Santhosh Koirala, President of the Nepal Bankers’ Association, responded with explanations. Subsequently, at the minister’s request, banks presented suggestions for necessary facilitation. Each banker was given approximately five minutes to speak. They highlighted the need for support regarding loan recovery challenges, the psychological impact on industrialists and entrepreneurs, blacklisting issues, and management of non-performing loans.

Koirala expressed dissatisfaction with the current business environment, pointing out that actions like crackdowns and raids weaken investment prospects. He urged serious reflection on such activities targeting industrialists and entrepreneurs.

“These actions instill fear among industrialists and entrepreneurs,” Koirala told the Finance Minister. “Under such circumstances, banks face difficulties in deciding whom to grant loans.”

“It’s difficult to lend, yet also difficult not to lend,” Koirala added. “When both lenders and borrowers are subject to punitive actions, we become apprehensive as well. The concerned ministries need to facilitate this process. While penalties should be applied for genuine faults, it is inappropriate to create problems for everyone under normal circumstances.”

On a positive note, some improvements have been observed in the hydropower sector. Bankers suggested government facilitation to expedite decisions in the PPA process. As the government targets 10,000 megawatts of electricity production, banks are ready to invest in this sector. Interest also extends beyond domestic investors to Non-Resident Nepalis (NRNs) keen on investing here.

Bankers also urged the government to quickly complete contracts for major projects, which would generate employment and stimulate loan demand, thereby invigorating the economy. Koirala noted that increased activity in construction would also spur the cement and steel industries.

Finance Minister Dr. Wagle stated that without credit growth, national development is not possible. He emphasized the pivotal role of banks and expressed confidence that necessary support and facilitation will be provided.

During the discussion, banks underscored the need for facilitation in loan recovery, issues related to not obtaining home and road recommendations, and management of bad loans and provisioning. Koirala conveyed that if the Ministry of Finance provides such facilitation, loan growth will increase and the targeted 7 percent economic growth can be achieved. He also conveyed bankers’ readiness to support the government’s efforts.