Banking stability in Nepal: Lessons from the 1997 Asian financial crisis
Summary
Nepal’s banking sector is showing stress similar to the pre-1997 Asian financial crisis, with rapid credit growth, rising non-performing loans, and heavy exposure to real estate and land speculation. The article urges Nepal Rastra Bank and the Ministry of Finance to create an asset management company and tighten lending rules to restore stability.
Key Points
- Private sector credit in Nepal has expanded rapidly, with much of it flowing into real estate, land plotting, and personal consumption loans.
- Bank asset quality has weakened, with non-performing loans and watchlist loans rising sharply under tighter NRB supervision.
- The article compares Nepal’s situation with the 1997 Asian financial crisis and points to South Korea, Malaysia, and Sweden as examples of bad-asset cleanup.
- It calls on Nepal Rastra Bank and the Ministry of Finance to establish a legally empowered asset management company and strengthen risk-based lending rules.
