NRB Directs Banks: Focus Not Just on Recovery, but on Credit Expansion Too

Kathmandu — Nepal Rastra Bank (NRB) has directed Chief Executive Officers of commercial banks to focus not only on loan recovery but also on credit expansion. Amid excess liquidity in the financial system and challenges in managing it, the central bank urged bankers to boost lending in order to keep the economy dynamic.

In a formal discussion held on Tuesday regarding the implementation and understanding of the current fiscal year's monetary policy, Governor Dr. Bishwanath Paudel instructed banks to prioritize new loan disbursements alongside recovery efforts. He emphasized that merely focusing on recoveries has halted credit expansion, which could stagnate economic activity.

Governor Paudel also drew attention to the need for reform in banks' operational focus. He reiterated that the central bank is moving towards reclassifying banks, encouraging them not only to continue with universal banking but also to adopt specialized banking practices. The monetary policy itself outlines plans to designate certain banks to invest in sectors such as energy, agriculture, and MSMEs based on their capacity and specialization.

The meeting also discussed the proposed amendments to the Bank and Financial Institution Act (BAFIA). Bankers suggested that provisions separating bankers from businesspeople should ensure proper exit plans for investors.

NRB has further instructed banks to submit a six-month plan for asset and liability management and to conduct their Annual General Meetings promptly.

On Wednesday, NRB is scheduled to hold a similar discussion with the chairpersons of banks, focusing on strategic planning, implementation of the amended BAFIA bill, and other regulatory matters.