Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: In a striking public statement, Santosh Koirala, President of the Nepal Bankers’ Association (NBA) and CEO of Machhapuchchhre Bank, has challenged the current state of dividend stagnation in Nepal’s banking sector, questioning how long investors will be deprived of returns amidst deteriorating profitability.
“Banks are not just financial intermediaries; they are investment vehicles,” Koirala said. “When will banks be able to distribute dividends again? Investors deserve predictable returns.”
His remarks came during a policy dialogue held in Kathmandu on Sunday, where banking executives, policymakers, and economists gathered to discuss pressing challenges in the financial sector. Koirala’s query reflects growing unrest among shareholders who have not received dividends for multiple fiscal periods due to regulatory constraints and economic stagnation.
Policy Rigidity Undermining Investor Confidence
Koirala directly linked the banks’ inability to distribute dividends to policy rigidity and emphasized the urgent need for flexible monetary policies in the upcoming fiscal year 2082/83. He believes such reforms are essential to trigger economic recovery and restore confidence in the banking system.
“If flexible policies are introduced, the economy will bounce back. But as it stands, banks are trapped,” he asserted.
He explained that banks are facing serious challenges in asset management, particularly concerning non-banking assets (NBAs) — properties acquired through defaulted loans that remain unsold due to bureaucratic red tape at the local government level.
Call for Powerful Asset Management Body
Koirala proposed the creation of a strong, centralized Asset Management Company (AMC) with the authority to oversee and liquidate non-performing assets without requiring approval from multiple layers of government.
“Right now, even selling a house requires permission from the local municipality. That’s unacceptable in a modern financial system,” he said. “We need a body that can manage distressed assets efficiently — without administrative interference.”
He added that existing restrictions — such as the prohibition on disclosing property photos or debtor names in auction notices — are insufficient and do not address the underlying problem of asset liquidation paralysis.
Directive Sector Lending Policy Needs Rethink
Koirala also called for a complete review of the “Directive Sector Lending Policy”, arguing that it no longer serves its intended purpose. While the average base rate across banks hovers around 6%, he highlighted that nearly NPR 800 billion of investible funds remain locked in the banking system due to a lack of effective credit deployment channels.
“There is liquidity in the system, but no efficient mechanism to push it into the economy. That’s the real crisis,” he explained.
His comments suggest that unless lending directives are made more pragmatic and responsive to sectoral demands, even ample liquidity will fail to stimulate productive investment.
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