Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU. The Confederation of Nepalese Industries (CNI) has submitted a comprehensive set of recommendations to the Nepal Rastra Bank for the upcoming Monetary Policy for fiscal year 2083/84, calling for significant reforms in lending regulations, loan classification standards, startup financing, capital market development and monetary policy governance.
In its proposal submitted on Asar 9, CNI argued that existing regulatory provisions have constrained credit expansion and private sector growth at a time when Nepal’s economy requires stronger investment, industrial expansion and job creation.
One of the key recommendations relates to the mandatory directed lending requirement imposed on commercial banks.
Currently, banks are required to allocate at least 30 percent of their total loan portfolio to designated sectors, including agriculture, energy and micro, small and medium enterprises (MSMEs). CNI has proposed gradually reducing this requirement, arguing that the provision limits banks’ investment flexibility and efficient capital allocation.
According to CNI, the existing framework forces banks to channel resources into specific sectors regardless of market conditions, potentially affecting credit efficiency and risk management.
The industry body has also sought revisions to the Working Capital Loan Guidelines 2079.
CNI argued that a uniform framework does not adequately reflect the differing business cycles, cash flow patterns and operational characteristics of various industries. It has recommended that the guidelines be implemented according to sector-specific business realities and that existing asset classification provisions be reviewed.
The recommendation comes amid continued complaints from businesses that rigid working capital regulations have tightened credit availability.
CNI has also urged the central bank to reconsider the mandatory Debt Servicing to Gross Income Ratio (DSR) provisions.
At present, non-business personal loans are subject to a maximum debt-to-income ratio of 50 percent, while housing loans are capped at 70 percent. CNI argues that fixed thresholds may prevent financially capable borrowers with strong assets and stable incomes from accessing credit.
The organization has recommended a more flexible and risk-based lending approach.
In another significant proposal, CNI has suggested that Nepal gradually move away from the existing base rate lending system and adopt internationally practiced interest-rate frameworks such as the Marginal Cost of Funds Based Lending Rate (MCLR) or External Benchmark-Based Lending Rate (EBLR).
According to CNI, many countries have already transitioned from traditional base-rate systems toward more market-responsive mechanisms, and Nepal should align itself with evolving international banking practices.
Among the most notable recommendations is the call to relax loan classification and blacklisting provisions.
Currently, borrowers can be blacklisted and secured loans classified as loss assets after one year of overdue payments. CNI has proposed extending the timeline for secured loans to two years, arguing that the existing threshold is excessively strict and does not adequately account for normal business cycle fluctuations.
The organization stated that fundamentally viable businesses are often categorized as non-performing and blacklisted due to temporary liquidity stress.
CNI has also called for easier restructuring and rescheduling of loans. It has proposed that restructured loans should initially be placed under a “watch list” category instead of being immediately downgraded to doubtful or loss status.
In addition, the organization wants the removal of the existing requirement that borrowers remain in a downgraded category for three months even after fully regularizing overdue loans.
To strengthen entrepreneurship and innovation, CNI has proposed the creation of a separate startup financing facility under the banking system.
Linking the recently announced Nepal Enterprise Facility with commercial banking channels, the organization has urged NRB to introduce a dedicated startup loan program aimed at improving formal financial access for new businesses and emerging enterprises.
The proposal aligns with the government’s broader push to develop Nepal’s startup ecosystem and innovation-driven economy.
CNI has also put forward several recommendations aimed at strengthening Nepal’s capital market.
The organization has proposed reducing the mandatory six-month holding period imposed on banks and financial institutions for investments in listed shares and debentures to three months. It argues that a shorter holding period would allow more active portfolio management and improve market efficiency.
It has also called for a review of the current blacklisting framework that automatically affects companies merely because a director or representative has been blacklisted elsewhere. According to CNI, separate legal entities that continue to service loans regularly should not be automatically blacklisted due to the actions of an individual associated with them.
At the institutional level, CNI has proposed the formation of a dedicated Monetary Policy Committee within Nepal Rastra Bank.
The committee would include the Governor, Deputy Governors and subject-matter experts and would be empowered to formulate monetary policy, set policy direction and determine monetary policy instruments.
According to CNI, such a structure would improve professionalism, expertise and accountability while bringing Nepal closer to international central banking practices.
The industry body has further recommended broader consultations before finalizing legislation related to an Asset Management Company (AMC), warning that insufficient discussion could create implementation challenges later.
Additionally, CNI has proposed that NRB conduct periodic Bank Lending Surveys to better understand credit demand, market sentiment and emerging sectors requiring financial support.
The recommendations also include allowing banks to allocate a portion of their balance sheets to sovereign-linked investment instruments to diversify income sources and strengthen financial stability.
CNI has urged NRB and the Securities Board of Nepal to establish a transparent secondary market for treasury bills and development bonds.
According to the organization, the absence of a liquid secondary market reduces investor participation and limits the tradability of government securities.
In the digital payments sector, CNI has proposed that Inter-Bank Fund Transfer (IBFT) charges be waived or significantly reduced when customers transfer money between accounts held under their own name across different banks.
The organization argued that current regulations do not distinguish between transfers to third parties and transfers between a customer’s own accounts, resulting in unnecessary transaction costs.
The recommendations reflect the private sector’s growing demand for a more flexible and growth-oriented monetary policy framework as businesses continue to face challenges related to credit access, investment expansion and economic recovery.
With Nepal Rastra Bank expected to unveil the monetary policy for FY 2083/84 in the coming weeks, many of CNI’s proposals are likely to feature prominently in discussions over how the central bank balances financial stability with the need to stimulate private sector-led growth.
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.
