Bankers Demand Flexible Loan Classification Policy and Permission for Share Trading

The Bankers' Association has submitted a set of recommendations to Nepal Rastra Bank for the upcoming monetary policy of fiscal year 2082/83 (2025/26). The association has urged the central bank to adopt a more flexible approach to loan classification and loss provisioning.

They have recommended that loans should only be classified as non-performing assets (NPAs) if they remain unpaid for more than two years past maturity. Only after this period should banks be required to provision 100% of the loan as a loss.

In addition, the association has demanded that banks be allowed to engage in short-term share trading. Currently, banks are only permitted to invest in shares and debentures of listed companies if the investment period exceeds one year. The bankers are calling for the removal of this minimum holding period.

The association has also suggested that banks issuing debentures should not be required to create a Capital Redemption Reserve. Instead, they should be allowed to issue bonus shares equivalent to the required reserve amount to manage capital adequacy.

Regarding liquidity management, the association has called for the Standing Liquidity Facility (SLF), which is currently available only three days a week, to be made accessible on all seven days. This would help ensure smoother liquidity operations, particularly during public holidays.

Finally, given the deteriorating asset quality and rising non-performing loans in the banking sector, the association has called for the introduction of a "Stressed Loan Resolution Framework." This framework would provide banks and financial institutions with clear procedures for loan restructuring and recovery, especially in cases where borrowers are impacted by economic downturns, natural disasters, or other special circumstances.