Kathmandu. In the year 2082 B.S., Nepal’s banking sector has been affected by sluggish economic activities. Since the start of the year, the economy has been growing at a relatively slow pace, with a drop in imports, a decline in the construction sector and a contraction in private investment, which has had a direct impact on banks’ credit demand. <\/p>\n
Banks could not expand the targeted loans as businesses were reluctant to take new loans that year. However, due to the satisfactory deposit collection, liquidity in the banking system has been eased and a situation has been created to accumulate investable money. As a result, interbank and deposit interest rates fell and loan interest rates fell gradually, putting pressure on banks’ profits even as they provided relief to borrowers. <\/p>\n
Meanwhile, the net profit growth rate of banks decreased due to slow loan expansion and weak economic activity, while non-performing loans (NPL) have increased slightly. Banks were forced to be more cautious as credit risk increased, especially in the construction, real estate and small and medium business sectors. <\/p>\n
However, the overall banking system is still believed to be within safe limits. The regulatory body, Nepal Rastra Bank, had tried to maintain financial stability by implementing stringent policies related to debt restructuring, risk management and capital adequacy during this period. In addition, digital banking has witnessed a significant advancement in mobile banking, QR payments, and online transactions, bringing ease to the customers. <\/p>\n
In 2082 B.S., the banking sector faced challenges such as a decrease in loan demand, rising non-performing loans, pressure on profitability and regulatory tightening, while positive aspects such as adequate liquidity, declining interest rates and expansion of digital services have also been seen. Overall, this year has been challenging, but the banking system has been able to maintain stability, and the banking sector is expected to pick up pace again if economic activity improves in the coming days g. <\/p>\n
Kiran Pandit appointed Deputy Governor of Nepal Rastra Bank<\/a><\/p><\/blockquote>\n