Over the past four years, 11 of Nepal’s major commercial banks have appointed new chief executive officers (CEOs)—a wave of leadership change that signals not just a generational shift, but also a strategic recalibration in response to growing economic uncertainty and an evolving regulatory environment. From Standard Chartered Bank Nepal’s first-ever Nepali CEO to successive appointments across both private and state-owned institutions, the sector is undergoing its most significant executive transition since the paid-up capital hike and consolidation drive of the mid-2010s.

This latest churn reflects more than just succession; it marks a reckoning with a set of new challenges. Today’s CEOs must navigate post-merger fatigue, digital disruption, persistent liquidity surplus and a slowing credit cycle—all while steering legacy institutions through technological and operational transformation.

But this is not the first time Nepali banking sector has witnessed a changing of the guard. When Bhuvan Kumar Dahal was appointed CEO of Sanima Bank in 2014, he took the helm of a relatively young institution. Sanima had been licensed as an ‘A’ class commercial bank just two years earlier. A former deputy CEO, Dahal’s promotion marked the start of a quiet revolution: the rise of a new generation of leaders groomed from within.

By 2017, NMB Bank had promoted Sunil KC from deputy CEO, Civil Bank did the same with Govinda Gurung and other institutions like Prabhu and Janata followed suit. This signaled an important transformation in the country’s financial sector where strategic continuity and institutional memory were prioritized during a phase of aggressive consolidation and capital strengthening under the central bank’s directives.

These internally-promoted leader

went on to steer their banks through sweeping regulatory reforms, liquidity crunches and the complexities of merger—ultimately leaving behind restructured, more resilient institutions.

Now, a new cohort has taken the stage. The latest appointments—from Manoj Gyawali at Nabil Bank and Govind Ghimire at NMB Bank to Gorakh Rana at Standard Chartered, along with other state-owned giants and mid-sized lenders—reflect both institutional maturity and an urgent need for innovation. Their mandate is not only to preserve past gains but to reimagine banking in Nepal for an era defined by volatility, digitization and rising public scrutiny.

The Changing of the Guard

Following the consolidation drive led by Nepal Rastra Bank (NRB), the number of commercial banks has dropped from 32 to 20. This structural overhaul has not only reshaped the competitive landscape but also sparked a generational shift in leadership.

One of the most high-profile appointments is Manoj Kumar Gyawali, who became CEO of Nabil Bank last month, succeeding Gyanendra Dhungana. Gyawali’s appointment highlights the increasing value placed on internal leadership development. Before joining Nabil, he served as CEO of Jyoti Bikas Bank and then rose through ranks at Nabil, holding key roles including Deputy General Manager, General Manager, Deputy CEO, and most recently, Senior Deputy CEO.

In a landmark move, Standard Chartered Bank Nepal appointed Gorakh Shumsher Rana as its CEO—the first Nepali to lead the institution bank since its establishment in 1987. An MBA graduate from the United States, Rana began his career at Grindlays Bank and has been with Standard Chartered since its early days. With nearly three decades of experience in retail, corporate and institutional banking, he previously served as Head of Global Banking and Deputy CEO.

Another notable appointment is Govind Gurung as CEO of the Agricultural Development Bank Ltd. Selected from 22 applicants and five finalists, Gurung brings 26 years of commercial banking experience to ADBL. His previous roles include CEO of Civil Bank and Myanmar Citizens Bank. As someone who began his banking career at Himalayan Bank, his appointment reflects a growing preference for leaders with local grounding and international experience.

Several other banks have also tapped internal candidates or industry veterans to lead them forward. In 2023, Nishchal Raj Pandey succeeded veteran banker Bhuwan Kumar Dahal at Sanima Bank, while Devendra Raman Khanal took over at Rastriya Banijya Bank, following the retirement of Kiran Kumar Shrestha after an eight-year tenure.

At Kumari Bank, Ram Chandra Khanal became CEO in November 2023 after the resignation of Ramesh Aryal. Khanal previously led NIC Asia Capital. Around the same time, in September 2023, Prime Commercial Bank promoted Sanjeev Manandhar to CEO, building on his previous roles as General Manager and Acting CEO.

Surendra Raj Regmi was elevated to CEO of Global IME Bank after serving in various key positions after serving in several leadership positions, including Chief Credit Officer, Chief Risk Officer, Chief Operating Officer and Senior Deputy CEO.

Most of these new leaders bring a strong understanding of regulatory frameworks, deep institutional knowledge and proven crisis management experience. They stepped into leadership at a time marked by post-merger challenges, surplus liquidity, fast-paced digital transformation and a sluggish economy—all of which make the role of a bank CEO more complex than ever.

“The banking sector today is not just about managing balance sheets. It is about balancing legacy with innovation, growth with governance and compliance with competitiveness,” one commercial bank CEO told New Business Age.

Navigating Regulation, Risk and Reform

Former bank CEOs describe the leadership transition as part of a natural cycle—albeit one with far-reaching consequences. The landscape today’s CEOs must navigate is vastly different from what their predecessors faced a decade ago.

Regulatory oversight has become significantly tighter. Accountability standards are higher, and the central bank now closely monitors many operational areas that were once left to the discretion of individual institutions.

“We need to look at this generational shift objectively. It is encouraging to see younger leaders stepping up—especially at a time when the banking sector is being reshaped by technology, rising risks and tighter regulations,” said Siddhant Raj Pandey, Chairperson and CEO of Business Oxygen Pvt Ltd, Nepal’s first private equity fund.

One of the most urgent challenges facing new CEOs is the sharp rise in non-performing assets (NPAs). NPA levels across the industry have reached record highs, posing serious threats to financial stability and public trust. Tackling this issue will require stronger internal controls and a rethinking of lending practices.

“Managing NPAs is a challenge this new generation must confront head-on,” said Sanima’s former CEO Dahal. “In our time, Nepal had some of the lowest NPA levels in South Asia. This situation today is more difficult.”

Adding to the challenge is the rapid rise of digital wallets and fintech firms, which are reshaping how customers interact with financial services. While these firms have not yet entered deposit-taking or lending, they are already influencing consumer expectations and forcing banks to rethink their strategies.

“Back then, our focus was on expanding the traditional banking business. Digitization and automation were just emerging,” Dahal said. Today, they are not just important—they are essential.”

Dahal believes that banks must now prioritize investment in new technologies, such as artificial intelligence, particularly in areas like customer service. “Nepali banks are not quite there yet, but those that adapt these technologies early will lead the way,” he added.

According to both Pandey and Dahal, the key question now is whether current CEOs have a deep enough understanding of technology. Their success will depend on their ability to drive digital transformation within their institutions.

“Can they successfully lead their banks into the fintech era by building tech-driven platforms? That will define their true value,” Pandey said.

In this unpredictable environment, Pandey also highlights the importance of non-funded financial products. “These instruments can enhance revenue streams while reducing risk exposure—an effective strategy in today’s uncertain environment,” he said.

Both Pandey and Dahal emphasize that today’s banking leaders must go beyond day-to-day operations. They must also take an active role in policy advocacy. While regulatory rigidity remains a major constraint, engaging constructively with the central bank and other authorities is an essential part of the job.

“They need to push for innovation—even if the current rules do not allow much room,” Pandey said. “Proactively lobbying for greater regulatory flexibility is now part of what leadership entails.”

Mounting Challenges

According to Nepal Rastra Bank (NRB) data, the average NPL ratio among commercial banks has climbed to around 5%, with some banks reporting even higher. Many CEOs trace this surge back to the COVID-19 period, when banks, under pressure to support the economy, relaxed lending standards and extended credit without properly assessing borrowers’ repayment capacity.

“The mistakes made during that time have now come back to haunt us,” said Ram Chandra Khanal, CEO of Kumari Bank. He added that loans were issued without thorough cash flow analysis, and in many cases, the borrowed funds were diverted to unproductive activities or used to finance foreign migration. This has led to a wave of defaults, particularly among SMEs and microenterprises.

Further compounding the problem is the unusually prolonged period of excess liquidity. Unlike in the past, when liquidity followed predictable cycles, this surplus has persisted for over 18 months, signaling deeper systemic issues.

“Liquidity used to rise and fall in a pattern, but the rhythm has disappeared,” said Devendra Raman Khanal, CEO of Rastriya Banijya Bank. “Until industrialists and businesspeople regain confidence, they won’t borrow from banks or invest their own capital.”

The hesitation to borrow reflects the broader economic slowdown. Demand for credit has dropped sharply in key sectors such as construction, manufacturing and consumer goods. Reduced capital expenditure has affected related industries like steel, cement, and bricks, creating a ripple effect. With fewer projects underway, loan demand has shrunk, leaving banks with stagnant balance sheets and falling interest income.

Despite having one of the highest credit-to-GDP ratios in South Asia, real economic growth in Nepal has failed to keep pace.

“If we want economic expansion, it has to come from productive sectors. Otherwise, we are just inflating credit in unproductive areas,” says Govind Ghimire, CEO of NMB Bank.

Much of today’s credit is being used to refinance existing loans or channeled into speculative ventures, undermining overall credit discipline. Another concern is the widespread practice of evergreening loans—where banks restructure or extend repayment terms to avoid classifying them as non-performing. While this can temporarily relieve pressure, it also masks the actual level of risk within banks portfolios.

“Evergreening was meant to help clients survive, not to reward poor performance,” Khanal of Kumari Bank said. “It is not a long-term solution.”

Meanwhile, changing customer preferences are adding to the pressure. Younger customers increasingly favor fast, digital-first financial services and show limited interest in long-term savings or investments. Although digital banking has transformed payment systems, most lending products remain largely traditional—restricting growth in this evolving segment.

To address these mounting challenges, the Nepal Bankers’ Association (MBA) has proposed setting up a “bad bank”—a specialized institution that would absorb distressed assets and help clean up commercial bank balance sheets. However, questions remain about whether such an institution could operate independently and stay free from political influence.

Without bold policy measures and stronger coordination between monetary, fiscal and regulatory bodies, the sector risks falling deeper into a cycle of low growth and heightened risk. Once seen as engines of economic development, banks are now taking a more cautious approach—focused more on survival and recovery than expansion.

“Typically, liquidity in Nepal peaks in the first or second quarter of the fiscal year and tightens later on,” said Tilak Raj Pandeya, CEO of Nepal Bank. “But that pattern has not held. For the past one and a half, we have had continuous excess liquidity—an unusual and worrying trend.”

Pandeya added that this is a particularly difficult period for the new generation of banking leaders. With mounting pressures and little signs of immediate relief, the road ahead is likely to remain challenging for at least next couple of years.

Where Did It Go Wrong?

The current banking troubles did not appear overnight—they were seeded during the post-COVID economic rebound, when banks flush with liquidity ramped up lending without properly assessing the risks. Today, that period of unchecked credit expansion has left behind a troubling mix of rising NPLs, idle liquidity and an economy too weak to absorb the capital pumped into it.

In the immediate aftermath of the pandemic, banks were in an unusual position. Liquidity was abundant, and capital had surged due to regulatory recapitalization. But there were few solid investment opportunities. In an effort to maintain profitability and meet capital deployment requirements, banks resorted to aggressive lending. Many went beyond their core expertise, rushing to push out funds wherever they could.

“Capital increased fourfold, but business did not grow in tandem. That mismatch forced banks to chase any lending opportunity—even at the cost of financial discipline,” said one senior banker.

This capital glut triggered fierce competition. Banks began undercutting interest rates, loosening credit norms and approving loans to clients with questionable repayment capacity—all in a bid to protect or grow their market share.

The competition was particularly intense in real estate, personal lending and trade finance—sectors promising quick returns but carrying higher risk. In their rush, banks abandoned traditional risk assessments, with many skipping even basic checks like cash flow verification.

“During the COVID period, loans were disbursed without proper cash flow analysis. Capital was deployed aggressively just to meet targets, and now the sector is paying the price,” explained Khanal of Kumari Bank.

While this strategy helped expand loan books and deliver short-term gains, it left banks exposed. Many of the businesses funded during this period lacked resilience or growth potential. Some borrowers misused the funds entirely, diverting them for other purposes. As post-pandemic demand cooled, repayment defaults began to rise, leading to a growing pool of distressed assets.

“Our loan books have expanded rapidly, but the real economy has not kept pace. That is a clear indication that credit is being funneled into speculative or unproductive areas,” Ghimire of NMB Bank said.

Instead of fueling sectors like agriculture, manufacturing or services, credit has often been recycled within the financial system. One clear example lies in agriculture lending. Many loans categorized under agriculture were actually diverted into high-return sectors like real estate and the stock market. These sectors initially offered quick gains but began contracting within a year.

“As those markets slumped, small borrowers who had misused the loans could not generate returns—or repay their debts,” several bankers said. “This misalignment is now reflected in rising NPLs, especially in agriculture and small enterprise portfolios.”

The crisis is also being deepened by a lack of viable investment projects. Business confidence remains low, weighed down by policy uncertainty, weak domestic demand and a lack of long-term infrastructure or industrial initiatives. Despite having ample liquidity, banks are seeing little appetite for new borrowing.

In hindsight, many bankers now admit that the sector mistook liquidity for opportunity. In a weak and uncertain economy, credit expansion turned into speculation. The current surge in NPLs, stalled credit growth and idle capital are consequences of that misjudgement.

As the sector shifts from expansion to damage control, it needs more than cautious lending. What is required is coordinated action—linking banking regulation with fiscal policy and real economic priorities. Without this, capital will remain underutilized and the banking system risks staying trapped in a cycle of overexposure, underperformance and systemic fragility.

Reviving SMEs

SMEs, once considered the engine of Nepal’s economic development, are now at the heart of a growing crisis. Ravaged by post-COVID demand collapse, funding mismatches, and reckless lending practices, the sector is struggling to stay afloat. Reviving this crucial yet fragile segment has become one of the most urgent and complex challenges for the new CEOs.

In the wake of the pandemic, banks were encouraged to extend concessional loans and refinance schemes to SMEs. Liquidity was abundant, interest rates were low and SME lending seemed both profitable and aligned with policy priorities. But what initially looked like an opportunity for growth soon revealed itself as a strategic misstep.

“The demand back then was artificial. SMEs borrowed on the back of market optimism and liquidity availability, but the economy never truly recovered. Now, repayments have stalled and defaults are rising,” a senior bank executive said.

As the economy slowed, SME revenues shrank—and so did their ability to service loans. Businesses were hit by rising input costs, weakening demand and intensifying competition—not just from other SMEs but increasingly from large corporations.

“We are seeing a trend of SMEs being acquired or pushed out by bigger players who have access to cheaper capital and wider networks,” Khanal of Rastriya Banijya Bank said.

This displacement is not always voluntary. Many SMEs, overwhelmed by liabilities, have either been bought out in distress sales or simply shut down. Some borrowers have migrated abroad, abandoning their obligations entirely. This has left banks saddled with distressed assets while local entrepreneurship declines.

The government’s concessional loan program, launched with fanfare in 2019, has largely fallen short of expectations. While funds were disbursed, essential support services such as business incubation, market access and technical training were missing. The much-publicized Rs 1 billion startup fund and plans for provincial incubation centers remained mostly on paper—leaving SMEs with financing but no functional roadmap.

Another pressing issue has been loan diversion. During the liquidity-rich post-COVID period, many SMEs misused borrowed funds—investing in non-core ventures or even financing migration. As repayment timelines arrive, banks are discovering that many of these loans have gone bad. NPLs in the SME segment have surged, leaving banks grappling with ways to recover loans without extinguishing already fragile businesses.

Regulatory mandates also pushed banks to channel SME investments into agriculture. Yet agriculture itself is now one of the most NPL-prone sectors. Similar trends are emerging in micro and small enterprises (MSMEs). For example, during last year’s floods, Nepal Bank reported that around 500 of its MSMEs were affected, many forced to close. Even minor external shocks are proving devastating for these vulnerable enterprises.

“During COVID, aggressive SME lending was done under the assumption that the economy would bounce back. But many SMEs were unprepared for that scale of expansion. Cleaning up the aftermath is now our burden,” Khanal of Kumari Bank said.

Rebuilding the SME sector will take more than just capital—it demands a transformational shift in mindset. This includes designing sector-specific loan products, strengthening credit risk assessment tools, coordinating with government agencies to ensure support mechanisms are functional and ensuring SME lending aligns with real market demand—not just regulatory or policy pressure.

The structural fragility of Nepal’s SMEs cannot be fixed overnight. But without targeted intervention, their continued decline could permanently weaken the country’s industrial and employment base.

“Getting the SMEs engine running again is not just a banking priority—it is a national economic imperative,” said Ghimire of NMB Bank.

In an economy marked by weak growth and surplus liquidity, reviving SMEs may be the most viable path to inclusive recovery. For the new crop of CEOs, it is more than just a policy priority—it is a litmus test of leadership.

Meeting the Gen Z Preferences

Today’s banks are facing a rapidly evolving customer base, with Gen Z leading the charge. Tech-savvy, value-driven and increasingly entrepreneurial, Gen Z expects more from their financial institutions than any generation before them. They demand speed, simplicity, personalization and purpose in the services they use. This generational shift is compelling banks to rethink their strategies, particularly in digital innovation and youth-oriented offerings.

“The priorities and preferences of Generation Z are evolving. There is now a clear need to focus on digitization, sustainable banking, green banking and climate-friendly practices,” Ghimire of NMB Bank said.

While many banks are already providing digitized basic services, these efforts remain largely limited to utility payments, fund transfers and balance inquiries. While progress is visible, such as the introduction of QR payments, mobile-based fixed deposits, and 24/7 account access, the digital experience still lacks depth.

Kumari Bank, for instance, offers a 0.20% higher interest rate on fixed deposits made via mobile banking–a targeted incentive for digitally active customers. However, core services, including personal and business loans, credit evaluations and insurance, still require physical paperwork and in-person visits. The digital transformation, though promising, remains partial: efficient but incomplete.

This gap is particularly challenging for young entrepreneurs and startups where Gen Z interest is strongest. Many in this generation are more inclined to launch businesses than seek traditional jobs. Although there are government-backed startup programs and concessional loans, access to capital remains a major barrier for them. Banks are still hesitant to fund ventures lacking conventional collateral.

“While loan disbursement occurred, the intended outcomes were not achieved,” said Khanal of Rastriya Banijya Bank.

To truly align with Gen Z expectations, banks must move beyond superficial digital upgrades. They need to build robust platforms that support digital credit scoring, online loan applications and alternative financing models such as revenue-based lending or peer-to-peer lending. Without such innovations, Gen Z customers may continue using banking apps for basic transactions, but turn elsewhere for meaningful financial services.

Meeting these emerging preferences will require more than just technology — it calls for a shift toward customer-centric design, embedded within supportive ecosystems. Gen Z does not just want a mobile app; they want a banking partner that understands their aspirations, enables their ambitions and respects their values. Banks that respond to this shift, by combining smart digital tools with real empathy and flexibility, will not just stay relevant, they will lead the future of financial services in Nepal.

Skill Gap: A Growing Barrier Transformation

One of the most persistent and structural challenges facing Nepal’s banking sector today is the widening skill gap—a problem exacerbated by the rapid pace of technological change, rising customer expectations and a sustained exodus of youth seeking better opportunities abroad.

In recent years, the demands on banking professionals have evolved significantly. A traditional background in management or finance is no longer enough. “In the past, a management degree alone might have been enough. But now, those with backgrounds in both management and IT are a better fit,” NMB Bank CEO Ghimire said.

This shift reflects a broader transformation in banking. Financial institutions are increasingly becoming technology-driven service providers, delivering integrated digital solutions rather than just traditional banking products. With the push toward digitization, green banking, and data-driven decision-making, the demand for skilled IT professionals has never been higher. Yet ironically, those best equipped for these roles are either uninterested in working in banking or are leaving the country altogether.

“It’s difficult to find quality IT professionals—many prefer freelancing or project-based work,” Ghimire added.

Banks are now heavily investing in internal capacity-building. Many institutions have launched in-house training programs and developed IT-friendly modules aimed at upskilling existing staff. The challenge is further intensified by Nepal’s rising youth migration. Thousands of young, educated, and tech-savvy Nepalis are pursuing education and employment abroad, draining the domestic labour pool.

“There’s a trend of human resources migrating abroad. To cope with this, proper training and orientation need to be provided,” Kumari Bank CEO Khanal said.

Training alone may not be enough if structural incentives, such as competitive salaries, career growth and quality of life, remain insufficient to retain talent. The skill gap is not just technical, it is also strategic. Today’s bankers must be fluent in everything from customer-centric digital services to regulatory compliance and environmental sustainability. New-generation banking leaders are often tasked with executing complex, multidimensional strategies using teams that may lack the necessary depth of expertise.

At the branch level, particularly in rural and semi-urban areas, the situation is equally concerning. While digital penetration is on the rise, financial literacy remains uneven. Many frontline staff lack adequate training to deliver advanced banking services or guide customers through digital platforms. As a result, even as mobile banking adoption grows, the lack of formal digital and financial training limits both usage and engagement with more sophisticated banking products.

Some banks are taking steps to bridge these gaps. Measures include offering higher interest rates for digital onboarding and investing in AI-powered customer service tools. However, these initiatives still require capable professionals to design, implement, and manage them—talent that remains in critically short supply.

Where Will Banks Stand in a Few Years?

Despite current stresses, the future for the Nepali banking sector is not without hope. The medium-term outlook could see a turnaround, fueled by recovering business confidence, emerging investment opportunities and the ability of new banking leadership to steer through these challenges.

Although interest rates have fallen below 7%, a rare window for investment, industries remain hesitant to borrow. This lack of confidence has led to sustained surplus liquidity in the banking system for over 18 months.

“Nonetheless, signs of recovery are beginning to emerge. Many businesses have started exploring potential investments in new sectors, aware that the low-interest environment won’t last forever. While confidence remains fragile, the groundwork for a revival is being laid. If sentiment improves and new ventures take shape, the next two years could mark a phase of growth,” said Pandeya of Nepal Bank.

The role of new banking leaders will be critical during this transition. They must manage high non-performing loans, sluggish credit demand and excess liquidity while identifying fresh avenues for growth. As market dynamics shift and macroeconomic conditions gradually stabilize, banks may emerge leaner, more cautious, yet also more innovative and adaptive.

“While the current landscape is fraught with challenges, Nepali banks are not standing still. Their future will depend on how effectively they address structural issues, rebuild trust in lending, and align strategies with the evolving economic cycle. The coming years could very well define the next era of Nepali banking,” Pandeya added.

(This is the cover story of  July 2025 issue  of New Business Age Magazine.)