Only a handful of people receive loans due to centralised lending: NRB Governor

KATHMANDU: Nepal Rastra Bank (NRB) Governor Dr Biswo Nath Poudel has said that lending by banks and financial institutions (BFIs) has become centralised and that a large portion of the total circulating loans is going to a limited number of individuals and groups.

Governor Poudel made the comments during a discussion on the bill to amend the Bank and Financial Institutions Act (BAFIA), 2073 at the meeting of the Finance Committee of the House of Representatives on Monday.

"Currently, there are around 1.94 million borrowers, of whom only 0.1% have taken approximately 3.9% of the loans, which indicates that most of the loans have gone to only a few individuals," he said.

The central bank governor also questioned whether it is acceptable for only a limited number of people to receive a large amount of loans and whether the credit disbursed has improved production.

Governor Poudel added that the regulatory authority is endeavouring to identify the directors and businesspersons of BFIs and to distinguish those with significant ownership from those merely associated with the bank. He expressed his belief that the bill will clearly spell out how much loan the BFI directors can or cannot borrow.

NRB Executive Director Guru Prasad Paudel said the current amendment to BAFIA is necessary because the existing regulations do not cover digital banking. He added that about Rs 5.5 trillion have currently been loaned.

The bill under consideration in the committee covers topics such as granting legal recognition for the use of digital currency and digital banking, clarifying the responsibilities of persons on bank boards, and discouraging the trend of taking large loans from banks in which one holds shares.

Similarly, the bill is expected to play an important role in establishing legal arrangements for the effective management and regulation of BFIs, based on the developed financial system, financial tools, financial security and financial risks at both national and international levels.

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