Task Force urges NRB to revive concessional loan schemes

Kathmandu, Dec. 24: The Banking Sector Reform Recommendation Task Force (BSRFRF) has urged the banking sector to immediately resume concessional loan programmes by taking responsibility for remaining government subsidies, to be reimbursed from dividends, to revitalise economic activity. 

“Adopt a policy of granting regulatory relaxations to uplift the sluggish economy without compromising the interests of depositors,” recommended the Task Force led by former Chairperson of the Securities Board of Nepal (SEBON) and economist Dr. Rewat Bahadur Karki, and comprising former President of the Nepal Bankers’ Association Bhuvan Kumar Dahal and Executive Director of the Bank and Financial Institutions Regulation Department of Nepal Rastra Bank (NRB) Guru Prasad Paudel. 

The Task Force was formed on 13 June 2025. It submitted its report to the Governor of the NRB, Dr. Biswo Nath Poudel, on Tuesday. 

It said that it is necessary to provide additional credit based on business potential and collateral enterprises seeking to restart or scale up in the post-COVID scenario, and to arrange for the restructuring and rescheduling of secured loans while prioritising depositor interest. 

Other suggestions include increasing limits for group-based loans and collateral-based entrepreneurial loans provided by microfinancial institutions, reviewing and reforming the rules regarding the blacklisting of borrowers, and ensuring easy access to business loans up to Rs. 500,000 in rural areas and Rs. 1 million in urban areas with appropriate collateral. 

“Review priority sector lending by studying demand in essential areas like education, health, and transport, and provide incentives for these sectors. Adopt policies to encourage sectors identified under the Green Taxonomy,” the Task Force directed the NRB. 

Likewise, the Task Force has recommended developing a mechanism for effective coordination with the private sector to promote economic expansion and development. 

For better regulation and supervision, it asked to take steps to structure the Board of Directors of banks and financial institutions (BFIs) to minimise conflicts of interest that arise when an individual is both a banker and a large businessman. 

Adopt a policy to prioritise risk-based effective supervision and place high importance on healthy regulation and customer-friendly banking, it said. 

According to the Task Force, the NRB should implement ‘Basic Regulation, More Supervision’ concept by classifying the BFIs into first, second and third tiers based on defined standards. It also suggested the NRB to rewrite directives and circulars to apply separately to first, second and third-tier institutions as required. 

Currently, the NRB issues a single circular for all classes of BFIs. 

Likewise, it has pointed to a need for a separate legal regulatory body for microfinance institutions due to their unique model and expansion. Until then, regulation should be strictly handled by the Microfinance Department of the central bank. A separate regulator for non-banking institutions such as the Employees Provident Fund, Citizen Investment Trust, and Social Security Fund has also been recommended. 

To facilitate effective credit flow in rural areas and revitalise the village economy, the Task Force has suggested the governor visit rural regions every month to interact with stakeholders on economic potential and credit demand. 

It has also asked to appoint a team of ‘financial gurus’ (comprising a successful businessman, a non-resident Nepali and a banker) in interested local municipalities, and task such teams with identifying opportunities for high-value addition agriculture and industry rather than traditional farming. 

Similarly, recommendations on mergers include making arrangements for the institutions with cross-holding to undergo mergers, facilitating the speedy completion of the merger process and granting the merging institutions the authority to decide on swap ratios and processes as per prevailing laws. 

The Task Force has also offered recommendations on removing Nepal from the ‘Grey List’ of the Financial Action Task Force. “There is a need to develop the Financial Information Unit (FIU) at the NRB into a separate, independent entity as per the fifth amendment of the Anti-Money Laundering Act. Despite the separation of the FIU, the NRB must play a special and more powerful role in removing Nepal from the Grey List,” reads the report. 

It has pointed to the possible conflict of interest between the NRB and Nepal Stock Exchange (Nepse) and suggested to recall NRB representatives from the Board of Directors of the latter. 

To support capital market development, the Task Force has recommended to facilitate the entry of Non-Resident Nepalese (NRNs) into the secondary market through banking and foreign exchange policies, and initiate government action to reduce the capital gains tax for NRNs from 25 per cent to 7.5 per cent - matching the rate for local Nepali investors. 

Take necessary steps for Rastriya Banijya Bank to go public with a 30 per cent IPO as per previous cabinet decisions, it has said.