Opinion | What’s wrong with Nepal’s banks?
Summary
Nepal’s banks face a structural crisis characterized by a collateral-based lending model, rising non-performing loans, governance failures, and lack of innovation, hindering credit expansion despite ample liquidity.
Key Points
- Nepal’s banking sector suffers from a primitive collateral-based lending model causing credit stagnation and rising non-performing loans.
- Governance failures, including insider lending and evergreening of loans, pose systemic risks to banks' balance sheets.
- Regulatory focus on compliance stifles innovation, preventing the adoption of modern credit evaluation methods like AI and fintech partnerships.
- Banking dysfunction hampers productive sector financing, exacerbating youth unemployment and economic inequality in Nepal.
