Kathmandu. With the formation of the new government, positive signs have started appearing in the banking sector. Many bankers are optimistic, especially in anticipation of an increase in demand for credit.
Although the banking sector has been under pressure due to sluggishness in economic activities, decrease in investment and decline in credit flow for some time, the situation will gradually improve, they said. According to bankers, political stability will play an important role in reviving economic activity. With the formation of the new government, development works are expected to move ahead, the confidence of the private sector will be boosted and overall economic activities will improve. This is expected to naturally increase the demand for credit in industry, business and consumer sectors.
Although Nepal’TAG_OPEN_p_14 s commercial banks currently have sufficient liquidity, banks have not been able to expand their investment due to low demand for loans. Bankers believe that the new government’s proactive and clear economic direction will help increase credit flow. They say that if the government’s policies are clear, stable and investment-friendly, then the private sector will be reactivated and the credit flow of banks will increase significantly. ‘
However, bankers have stressed that risk management should be given equal priority along with credit expansion.TAG_OPEN_p_13 Past experience has shown that uncontrolled credit flow can cause problems in the financial system. Therefore, they say that while extending the loan, the capacity of the borrower, the viability of the project and the overall financial condition should be closely evaluated.
At the same time, bankers have considered the role of the government and regulatory bodies to be very important. According to them, it is necessary for regulatory bodies like Nepal Rastra Bank to bring timely monetary policy, provide necessary flexibility to the banking sector and adopt balanced policy to maintain financial stability. They also believe that long-term economic recovery is possible only when the government and regulators work in coordination with them.
The simplicity and transparency of the tax system has also been put forward as an important factor for credit expansion.TAG_OPEN_p_11 It is believed that if an environment conducive for the entrepreneurs to pay tax in an easy manner would be created, their willingness to invest would increase and financial access would be expanded through the banking sector. For this, bankers suggest that the new government needs to bring stability and clarity in tax policy.
Similarly, the government should focus on simplifying the legal process, expediting infrastructure development and removing policy dilemmas to create investment-friendly environment.TAG_OPEN_p_10 Bankers are of the view that big projects will move forward and the credit expansion of banks will be sustainable only if the private sector can make long-term plans.
Although the banking sector as a whole seems optimistic about the new government, they have put forward policy stability, transparency and effective implementation as the main conditions.TAG_OPEN_p_9 If these aspects can be improved, credit expansion is expected to increase in the near future, stimulate economic activity and have a positive impact on the overall economy of the country.
