Govt concerns rise after the repercussions of the problems in the financial sector start taking their toll on the economy
KATHMANDU, March 6: The government has shown concerns over the ongoing problems surfaced in the banking sector only after the country’s economic activities have started to show negative impacts along with the dwindling businesses of banks and financial institutions (BFIs).
On Sunday, Prime Minister Pushpa Kamal Dahal discussed the current issues of the banking and financial sector with the representatives of the private sector and the governor of the Nepal Rastra Bank (NRB). Dahal started initiatives to solve the problems in the financial institutions including microfinance, cooperatives and the banks’ interest rates.
Nepal’s economy has already shown a slowdown, with a mere growth rate of 0.8 percent in the first quarter of the current fiscal year. Soaring inflation and exorbitant interest rates have taken a toll on the overall demand of the economy.
PM Dahal discusses banking sector problems with finance ministe...
Banks have been facing increasing non-performing loans, which has seriously challenged the financial health of the banking business. Many microfinance and cooperatives have landed in serious crisis.
Prime Minister Dahal, who had been busy solving political stalemate, just got time on Sunday to render his priority to rescue the economy from its depleting financial health. Dahal said he expects suggestions from the private sector on how to solve the current problem. “As the economy is not in easy-going condition, the government is fully focused on solving the problem in the sector,” he said.
Dahal hinted at forming a high-level commission to solve the problems surfaced in the BFIs. "The government is serious about solving the problem, if necessary, a high-level commission can be formed for this," he said.
At present, the commercial banks have been reeling under the heat of increasing NPLs, while they have been unable to increase lending due to a rising case of bad loans. According to the NRB report, the banks’ NPLs have increased from 1.31 percent in the first seven months of the current fiscal year compared to that of 2.63 percent in the same period last month. On the other hand, the majority of the banks have been unable also to maintain the credit-deposit ratio at the mandatory 90 percent.
The problems seen in the banking business and overall economy are said to have taken down microfinance companies along with them. Since the past few weeks, microfinance companies have been unable to recover their outstanding dues, while a number of their clients have been found overburdened with the loans from multiple microfinance companies.
Similarly, the cooperative sector has also been witnessing an increasing number of cases of misappropriation of depositors’ money. Even the big cooperatives monitored by the NRB have been found to have landed in a liquidity crisis.
The borrowers have been demanding the scrapping of microfinance companies. On the other hand, there is a group on the streets protesting, saying they cannot pay back the loans taken from banks and financial institutions and they should be waived. Traders are also protesting on the streets against the banks charging high interest rates.
