Central bank worried about ‘unnatural rise’ in blacklisted entrepreneurs

Kathmandu, Nov. 15: Governor of the Nepal Rastra Bank (NRB) Dr. Bishwonath Poudel has said that it is unreasonable to have more than 150,000 individuals blacklisted in a country that has only about 1 million entrepreneurs. 

Speaking at the sixth Annual General Meeting of the Confederation of Banks and Financial Institutions, Nepal (CBFIN) held in Kathmandu on Friday, he expressed serious concerns over the unnatural rise of blacklisted entrepreneurs. He was particularly critical about the criminalisation of cheque bounce. 

According to him, the central bank is studying whether the growing number of blacklisted individuals is one of the reasons for the slow growth in loan demand which resulted in increased liquidity in the banks and financial institutions (BFIs). 

Stating that the NRB is putting its efforts to address the issues related to loan-loss provisioning, Governor Poudel assured the private sector that the policy obstacles would be reviewed and addressed on a timely manner. 

“We don’t want to create difficulties for the banks and entrepreneur. No policies will be implemented without proper study and assessment of the situation of Nepali economy,” he said. According to him, the NRB is mapping contributions of the different classes of banks, especially the microfinance institutions. 

On the occasion, he urged the BFIs to increase investment in business and support entrepreneurs. 

“The Central bank aims to enhance efficiency of BFIs and facilitate them with suitable policy practices adopted by other countries,” said Governor Poudel. 

Chairman of CBFIN Upendra Poudyal highlighted the challenges faced by the BFIs and stressed the need for reforms in order to facilitate the accumulated liquidity in the 

financial system. 

He said that policies relating to capital adequacy also need to evolve in line with changing economic realities. 

“Given the growing uncertainty surrounding profitability and asset quality, banks now require options for recapitalisation. So, we urge policymakers to open the way for alternative capital instruments, including rights issues and hybrid financial instruments,” he said, stressing that it will help strengthen the capital base of the banking sector.

According to him, it is equally important to encourage international investors and Non-Resident Nepalis (NRNs) to invest in the equity of Nepal’s banks and financial institutions. 

Poudyal also demanded that the BFIs should be allowed to charge fees based on the services they provide to enhance both service sophistication and quality. 

He stated that the banks’ continued focus is on financial inclusion, particularly empowering local households, small, and medium-sized enterprises (SMEs) as engines of employment creation and development. 

“We are clear that the banking sector must focus on building the real economy. Nepal now urgently needs expanded bank investment in the agricultural sector to support food sovereignty and agricultural modernisation,” he said.

According to him, since the development of banks, and industry and commerce runs parallel, there is a need for longstanding, interdependent and profound relationship between the two. 

Speaking on the occasion, President of Microfinance Bankers Association Nepal (MBAN) Ram Bahadur Yadav said that attention should be paid to connecting financial and non-financial aspects as access to finance along cannot ensure the sustainability of business, investment. 

He stressed the need for facilitation to promote investment in the SME sector. 

Vice-President of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Anjan Shrestha said that loan of Rs. 5 million should be provided without collateral to a group of youth making joint investment in an enterprise.

He said that the current crisis faced by the financial system and business is the fallout of the austere policy measures in the aftermath of the COVID-19 pandemic. 

President of the Confederation of Nepalese Industries (CNI), Birendra Raj Pandey, said that the recent policies introduced by the NRB following the formation of the new government also reflected the concerns of the recent Gen-Z movement. According to him, it is the common responsibility of all to bail out the economy from the crisis. 

Similarly, President of the Nepal Chamber of Commerce, Kamlesh Agrawal, said that the government must ensure security guarantees, and that the central must adopt 

effective policies.