FM Dr. Prakash Sharan Mahat Engages Bankers in Crucial Banking System Discussions

Finance Minister Dr. Prakash Sharan Mahat convened a significant meeting on Sunday with top banking executives to address prevailing challenges within Nepal’s banking system. The discussion, held at the Ministry of Finance, focused on unraveling the perplexing issue of subdued loan demand despite an ample surplus of liquidity within the market.

Amidst a series of ongoing consultations with key stakeholders, including private sector representatives, donor agencies, and regulatory bodies, Dr. Mahat’s engagement with the banking sector underscores the government’s commitment to comprehensive economic reforms.

In a candid exchange, Finance Minister Dr. Mahat posed fundamental questions to the assembled CEOs: “Why has the demand for loans remained stagnant within banks and financial institutions? How can the banking sector actively contribute to propelling economic growth? What strategic measures should the government and Nepal Rastra Bank undertake to ameliorate the current stagnation?”

Sunil KC, Chairman of the Nepal Banker’s Association, candidly voiced concerns about the eroded confidence of both the private sector and the banking industry. A source of bewilderment, according to KC, stems from the imposition of taxes on Follow-On Public Offerings (FPOs), leading to a state of ambiguity.

KC further highlighted a disconcerting trend, revealing that local level deposits have diminished by nearly NPR 150 billion since the initiation of the current fiscal year. Expressing a cautiously optimistic view, KC noted that interest rates are on a downward trajectory, potentially culminating in the achievement of single-digit rates.

Addressing the multifaceted concerns presented by banking leaders, several recommendations emerged from the discourse. Bankers unanimously called for the liberalization of land allocation and a relaxation of regulations governing the real estate sector. The simplification of loan disbursement processes for small and medium enterprises (SMEs) was also emphasized as a pivotal step towards fostering economic vitality.

As Nepal’s Finance Minister Dr. Mahat engages in these pivotal dialogues, the nation’s economic future hangs in the balance. The collaborative efforts of governmental bodies, regulatory institutions, and private sector stakeholders are eagerly anticipated as the nation strives for a robust and resilient economic landscape.