From fintech to bad loans: Budget hands Nepal Rastra Bank a broad reform mandate

KATHMANDU – The Government of Nepal has placed Nepal Rastra Bank (NRB) at the center of an ambitious financial sector reform agenda, assigning a wide range of responsibilities through the fiscal year 2083/84 (2026/27) budget and increasing expectations for the upcoming monetary policy to drive implementation.

Finance Minister Dr. Swarnim Wagle, while unveiling the budget on Friday, announced a series of reforms aimed at modernizing Nepal’s banking and financial system, expanding digital financial services, improving access to credit, strengthening financial stability, and addressing rising non-performing loans (NPLs).

The government has set an ambitious target of achieving 7 percent economic growth while keeping inflation within 6 percent in the coming fiscal year. To support these macroeconomic objectives, the budget explicitly states that Nepal Rastra Bank will formulate a monetary policy that facilitates the implementation of the policy reforms and programs announced in the budget.

As a result, the central bank is expected to play a critical role in translating many of the government’s financial sector initiatives into operational policies and regulatory frameworks.

NRB to Oversee Planned Fintech Marketplace

One of the most significant announcements in the budget is the proposal to establish a Fintech Marketplace under the supervision of Nepal Rastra Bank.

The initiative is intended to promote innovation in financial technology while ensuring regulatory oversight. However, industry experts note that its success will depend on detailed policy provisions covering fintech licensing, regulatory sandboxes, supervisory frameworks, operational standards, and transaction limits.

These issues are expected to be addressed through the upcoming monetary policy, making the central bank a key driver of Nepal’s digital finance transformation.

Push for International Digital Payment Integration

The budget also prioritizes the integration of Nepal’s digital payment ecosystem with international payment networks.

The government has proposed allowing commercial banks and payment service providers to collaborate with global payment systems while strengthening the National Payment Switch infrastructure.

Implementation will require NRB to establish regulatory guidelines governing cross-border digital payments, payment aggregators, settlement mechanisms, and interoperability standards. These measures are expected to be clarified through the monetary policy framework.

Data-Driven Lending System on the Agenda

Another major reform highlighted in the budget is the adoption of a data-driven lending system.

The government has proposed that credit decisions be increasingly based on borrowers’ economic activities, transaction histories, and creditworthiness assessments. Such a system would help improve risk management and expand credit access to productive sectors of the economy.

However, Nepal’s credit scoring infrastructure remains underdeveloped compared with more advanced financial markets. Consequently, the effectiveness of this initiative will depend heavily on policy interventions and regulatory support from Nepal Rastra Bank.

Greater Support for SMEs and Women Entrepreneurs

The budget places particular emphasis on expanding financing opportunities for small and medium-sized enterprises (SMEs), women entrepreneurs, and businesses seeking post-crisis recovery support.

Financial sector observers expect NRB to support these priorities through refinancing facilities, concessional lending programs, risk-sharing instruments, and targeted credit schemes.

The private sector is therefore closely watching the upcoming monetary policy for measures that could improve financing conditions and stimulate investment.

Rising Pressure to Address Non-Performing Loans

The growing volume of bad loans in Nepal’s banking sector remains one of the most pressing challenges facing policymakers.

To address this issue, the government has announced plans to establish a National Asset Management Company by mid-January 2027 (Poush 2083 BS). The proposed institution is expected to help manage distressed assets and facilitate the resolution of non-performing loans.

However, experts note that key reforms related to loan restructuring, provisioning standards, management of non-banking assets, and distressed asset disposal will still require active implementation by Nepal Rastra Bank.

Previous government commitments to establish an asset management company yielded limited progress beyond preliminary legal preparations. With a specific deadline now included in the budget, pressure is mounting on regulators to deliver tangible results.

P2P Lending to Enter the Regulatory Framework

For the first time, the government has announced plans to formally regulate peer-to-peer (P2P) lending platforms, reflecting the growing global popularity of alternative financing models.

The implementation of this initiative will require NRB to develop a comprehensive regulatory framework covering licensing requirements, investment limits, consumer protection measures, operational standards, and risk management guidelines.

The central bank is expected to introduce these provisions through its forthcoming monetary policy.

Monetary Policy Becomes the Key Implementation Tool

While the budget outlines an extensive roadmap for financial sector modernization, much of its success will depend on the effectiveness of the upcoming monetary policy.

From fintech regulation and digital payments to credit expansion and bad-loan resolution, Nepal Rastra Bank has been tasked with translating broad policy commitments into practical and enforceable measures.

With the government targeting stronger economic growth, increased private sector investment, and deeper financial inclusion, the upcoming monetary policy is expected to be one of the most consequential in recent years, placing the central bank under significant pressure to deliver meaningful reforms across Nepal’s financial system.