Nepal unveils plans for digital banks and asset management company in 2025 economic strategy

KATHMANDU: In a bold move to modernize its financial sector, the Nepal government has announced the establishment of digital banks and an asset management company as part of its policy and program for the upcoming fiscal year. The initiatives, aimed at fostering a digital economy and addressing banking sector challenges, signal Nepal’s ambition to align with global financial trends and enhance economic resilience.

The government plans to create an asset management company to tackle non-banking assets and bad loans plaguing banks and financial institutions. “An asset management company will be established to manage non-banking assets and bad loans,” the policy document stated. This move builds on the Nepal Rastra Bank’s earlier commitment in its current fiscal year’s monetary policy to set up such a company. The initiative is expected to alleviate the burden of non-performing assets, strengthen financial institutions, and boost investor confidence in Nepal’s banking sector.

A cornerstone of the government’s strategy is the promotion of a digital economy, with a strong emphasis on cashless financial transactions. To achieve this, the government will introduce policy and legal frameworks to establish digital banks. “Digital banks will be set up through necessary policy and legal arrangements,” the policy and program declared. These banks, operating primarily online without physical branches, are poised to revolutionize financial services in Nepal by offering accessible, efficient, and cost-effective banking solutions. The move aligns with global trends toward digitalization, aiming to enhance financial inclusion, particularly in underserved rural areas.

The announcement has garnered attention from financial experts and the private sector, who see it as a step toward modernizing Nepal’s economy. “Digital banks could transform how Nepalis access financial services, especially in remote regions,” said a banking analyst. The asset management company, meanwhile, is expected to address the growing issue of bad loans, which have hindered the banking sector’s growth. According to Nepal Rastra Bank, non-performing loans in commercial banks stood at 3.5% in mid-2024, a challenge the new company aims to mitigate.

The government’s focus on a digital economy comes amid rising smartphone penetration and internet access, with over 80% of Nepalis now connected online. This digital shift is expected to drive e-commerce, fintech innovation, and financial literacy, positioning Nepal as a competitive player in the regional economy.

However, experts caution that robust cybersecurity measures and regulatory oversight will be critical to ensure the success of digital banks.

The private sector has welcomed the initiatives but stressed the need for swift implementation and clear regulations. “The asset management company and digital banks are promising, but their success depends on transparent policies and stakeholder collaboration,” said a representative of the Nepal Bankers’ Association.

As Nepal grapples with economic challenges, including sluggish growth and fiscal constraints, these measures aim to inject dynamism into the financial sector. The government’s commitment to legislative reforms for digital banks and the asset management company underscores its intent to foster innovation and stability. With the 2025 budget looming, stakeholders are eager to see how these policies translate into actionable outcomes, potentially reshaping Nepal’s economic landscape.