The Kathmandu Post reports that mandatory loans to priority sectors have become some of the most problematic assets for Nepal’s financial institutions. A July 3 analysis indicates that lending to agriculture, construction, and deprived sectors is generating concerning levels of non-performing loans. The Nepal Rastra Bank (NRB) enforces these quotas to promote financial inclusion, yet the rising defaults pose a significant challenge to stability. This deterioration in asset quality could restrict banks’ capacity to extend new credit, necessitating potential adjustments to central bank guidelines.
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