Only a handful of people are getting loans due to centralisation of loan expansion: NRB Governor

Kathmandu: Nepal Rastra Bank (NRB) Governor Dr Biswo Nath Paudel has said that the lending of banks and financial institutions has become centralised, and a large portion of the total circulating loans is going to a limited number of individuals and groups.

Governor Paudel said so during the discussion on the bill to amend the ‘Bank and Financial Institutions Act (BAFIA), 2073’ at today’s meeting of the Finance Committee under the House of Representatives.

‘Currently, there are around 1.94 million borrowers, out of which only 0.1 percent have used approximately 3.9 percent of the loans, which indicates that much of the loans have gone to only a few individuals,’ he said.

The Central Bank governor also said that the question is whether it is good or not for only a limited number of people to receive a lot of loans, and whether such disbursed credit has improved production or not.

Governor Paudel added that the regulatory authority is trying to identify the directors and business persons of banks and financial institutions, and to distinguish those who are individuals with significant ownership and those associated with the bank. He expressed his belief that the bill will spell out clearly how much the BFI directors can or cannot borrow.

NRB Executive Director Guru Prasad Poudel said the current amendment to the BAFIA is necessary because the existing regulations do not cover digital banking. He added that currently, about 5.5 trillion rupees have been loaned.

The bill under consideration in the committee includes topics such as granting legal recognition to the use of digital currency and digital banking, seeking clarity in the responsibilities of persons on bank boards, and discouraging the trend of taking large loans from banks in which one holds shares.

Similarly, this bill is expected to play an important role in making legal arrangements for the effective management and regulation of banks and financial institutions based on the developed financial system, financial tools, financial security, and financial risks at both national and international levels.

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