SEJON panel urges monetary policy to support growth and relieve banking sector strain

KATHMANDU: Society of Economic Journalists Nepal (SEJON) held an interaction and panel discussion in Kathmandu on the role of monetary policy in accelerating economic growth.

Speaking at the programme, Nepal Rastra Bank (NRB) Deputy Governor Kiran Pandit said the next monetary policy must support the government’s growth target while keeping inflation and financial stability in check. He warned that market expectations are high and urged clearer communication to distinguish regulatory measures from monetary tools. Pandit also called for a review of loan restructuring and concessional arrangements used during the Covid19 pandemic and for ongoing dialogue on digital finance risks such as fintech, open banking and technology-related threats.

Meanwhile, Confederation of Banks and Financial Institutions Nepal (CBFIN) President Prachanda Bahadur Shrestha said the banking sector is under severe pressure from non-productive assets and urged practical, risk-based flexibility in loan classification, provisioning rules and management of non-banking assets. He told the forum that banks have accumulated more than Rs 60 billion in non-banking assets, which is limiting their capacity to invest in the economy. Measured flexibility, he said, would give viable businesses time to recover and free up capital for productive lending.

Nepal Bankers’ Association (NBA) President Santosh Koirala called for regulatory reforms to give the banking sector ‘breathing space’. He rejected the public narrative that banks are highly profit-oriented, noting an average return of about 7%, and urged changes to non-performing asset classification and provisioning timelines that he said do not allow sufficient time for recovery. Koirala pressed for the speedy establishment of an asset management company (AMC) and reforms to base rate calculation, risk-based pricing, regulated fees and reserve rules to help banks maintain minimum commercial returns.

Anal Raj Bhattarai, a banking expert, said the core problem is weak credit demand and capital constraints rather than a lack of liquidity or the level of interest rates. He pointed to private sector credit expansion of 5.7% and a non-performing loan (NPL) rate of 4.36%, and recommended structural reforms, improved borrower transparency through credit scoring and mandatory ratings, and measures to mobilise capital via debt instruments such as debentures. Bhattarai also urged clearer rules for valuation and purchase pricing of bad loans if an AMC is to operate effectively.

Panel speakers warned that lower interest rates alone will not revive investment without stronger policy stability and renewed private sector confidence. They recommended that monetary policy address banks’ capital capacity, support private sector investment and promote long-term economic expansion through measures such as developing a secondary market for government bonds, improving QR code interoperability, centralising KYC and strengthening digital fraud controls.

SEJON President Bhagawat Bhattarai said the upcoming monetary policy should support the government’s goal of achieving growth above 7% and cover areas the budget did not, including investment, production, agriculture, industry, fintech and small and medium enterprises. He urged the NRB to ensure the policy helps convert positive financial indicators into real credit expansion and economic activity.