Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal Rastra Bank Governor Dr. Bishwanath Paudel has sharply questioned the effectiveness of SME and agricultural lending, warning that misuse of priority-sector credit is contributing to rising bad loans across the banking system.
Speaking at the sixth general assembly of the Confederation of Banks and Financial Institutions Nepal (CBFIN), the governor said that despite the central bank’s directives placing SME and agriculture lending as national priorities, the performance and real impact of these loans remain highly questionable.
Governor Paudel said the recent spike in non-performing loans (NPLs) reflects deeper structural problems, including whether borrowers are using credit for the intended purpose.“Has SME lending really produced the expected results? Is agricultural credit actually going to farming, or is it being diverted elsewhere? Are borrowers taking ‘agriculture loans’ only to travel abroad, or are banks merely pushing paper to meet targets?” he asked critically.
He stressed that if agricultural loans were genuinely utilized, Nepal would have seen stronger entrepreneurship growth and increased employment in rural areas. “But that has not happened,” he noted, adding that the role of microfinance institutions and branch managers in monitoring loan use must also be examined.
Paudel further highlighted emerging risks, pointing to rising loan-loss provisioning requirements, a surge in cheque bounce incidents, and growing blacklisting cases.“There are 1.9 million borrowers in the country. Out of them, 150,000 being blacklisted is a serious problem. We must understand whether blacklisting reflects borrower misconduct or banks’ failure to ensure responsible lending,” he said.
The governor also raised concerns about the efficiency of bank branches across the country. With branch expansion continuing aggressively in recent years, Paudel said it is crucial to analyze whether all branches are operating effectively and serving genuine financial needs.
His remarks come at a time when Nepal’s financial sector is grappling with slowing credit growth, rising defaults, and mounting pressure on banks to improve risk management and lending discipline.
Your email address will not be published. Required fields are marked *
Comment *
Name *
Email *
Website
Save my name, email, and website in this browser for the next time I comment.
