CBFIN welcomes monetary policy, urges action on loan‑loss provisioning and non‑performing loans

KATHMANDU: Confederation of Banks and Financial Institutions Nepal (CBFIN) has welcomed the monetary policy for fiscal year 2026/27 unveiled by Nepal Rastra Bank (NRB). 

The organisation noted that the central bank has adopted a monetary stance with a balanced approach towards maintaining price stability, financial-sector stability, regulatory simplification and overall economic equilibrium, while altering the traditional framework of the past to send a positive signal to the financial system and the private sector.

CBFIN views several policy provisions as visionary and positive steps. These include measures regarding the management of non-performing loans in sick industries and the rehabilitation of stressed loans. It also highlighted the decision to keep the policy rate, standing deposit facility rate, bank rate, cash reserve ratio, statutory liquidity ratio and standing liquidity facility unchanged to help make the business environment more predictable and to maintain policy stability.

Additionally, the organisation welcomed making the process of opening or closing bank branches more flexible, encouraging the reduction of banks’ operating costs by digitalising financial services, encouraging commercial banks to invest in foreign government bonds to ease the management of liquidity flow resulting from foreign-currency purchases, and conducting sterilised interventions during the purchase of foreign currency.

However, key suggestions submitted by CBFIN during the formulation of the monetary policy have not been addressed at present. These include proposals regarding risk-based loan-loss provisioning, loan-loss provisioning based on total risk in secured loans, certain regulatory facilitations related to capital adequacy, and improvements in prudential regulations in line with international practice.

Despite this, CBFIN expects that NRB, after a necessary study, will address these recommendations practically as soon as possible through the upcoming unified directives. The organisation stated that these suggestions will provide crucial support to make the management of non-performing loans and credit flow to the private sector more effective, and to achieve the Government of Nepal’s goal of economic expansion, in light of Nepal’s current economic condition and the increasing capital pressure on the banking sector.

CBFIN added that it remains committed to ongoing constructive dialogue, collaboration and providing necessary suggestions to NRB and the Government of Nepal to maintain financial stability, make the banking system more robust, competitive and capable, accelerate the recovery of the private sector, and keep the overall economy vibrant through effective implementation of the provisions of the issued monetary policy.