The newly appointed Nepal Rastra Bank (NRB) Governor, Dr. Biswo Nath Poudel, has raised concerns over the increasing concentration of bank lending among a narrow group of borrowers. Addressing the Finance Committee of the House of Representatives in late May, he stressed the need for reforms to ensure broader and more equitable access to credit.
Dr. Poudel cited data showing that just 0.01 percent of borrowers account for 3.9 percent of total loans, reflecting a skewed credit distribution that benefits a small elite. Of the roughly 1.94 million borrowers in the banking system, a disproportionate share of credit is going to a limited number of individuals and groups, he noted, raising questions about both fairness and economic productivity.
In a bid to address these issues, NRB formed a banking sector reform task force on June 13 under the leadership of Dr. Rewat Bahadur Karki. Among the six mandates assigned to the task force is improving access to credit in rural areas, a long-standing challenge in Nepal’s financial landscape.
Dr. Poudel also completed a week-long nationwide tour in June, following which he convened a meeting on June 17 with CEOs of banks and financial institutions. In that session, he reiterated the need to expand credit access and break existing patterns where lending is often influenced by personal or political connections.
NRB is currently drafting the Monetary Policy for the upcoming fiscal year, and Dr. Poudel’s early public remarks suggest a strong focus on credit diversification and decentralisation. His statements indicate dissatisfaction with the current structure of credit deployment and a clear intention to push for reforms in the forthcoming policy.
A review of NRB data supports his concerns. As of mid-April 2025, only 3.3 percent of total deposit account holders in banks and financial institutions had taken loans. While deposit accounts have surged to 58.7 million, the number of borrowers remains under 2 million. In contrast, a decade earlier in 2015, loan accounts represented 6.61 percent of total customers, with 1.06 million loan accounts against 16.2 million deposit accounts.
The past decade has seen a 264 percent rise in deposit accounts, compared to just an 82 percent increase in loan accounts. The expansion of banking branches, mandatory bank accounts for payroll and social security payments, and the requirement of bank accounts for stock market transactions have driven the surge in deposit accounts. However, this growth has not translated into a proportional rise in lending.
Dr. Prakash Kumar Shrestha, a member of the National Planning Commission, acknowledged that while financial access has improved, loan disbursement remains limited. He noted that government and central bank initiatives, including subsidised interest rates and targeted lending schemes, are gradually beginning to diversify the credit landscape.
Still, progress in directed lending remains sluggish. The NRB mandates that 15 percent of total loans be allocated to agriculture, 10 percent to energy, 15 percent to micro, small, and medium enterprises (MSMEs), and 22 percent to disadvantaged groups. Commercial banks are required to meet these targets by mid-July 2028. Development banks and finance companies must channel 20–25 percent of their loans into agriculture, MSMEs, energy, tourism, and low-income segments under the same timeline.
Banks have successfully lobbied for deadline extensions, citing the lingering effects of the COVID-19 pandemic and a sluggish economic recovery. During a recent consultation with Governor Poudel, banking executives argued that fulfilling the lending quotas remains difficult under current conditions.
Bankers also pushed back against the notion that credit expansion is straightforward. One CEO emphasised that the primary obligation of banks is to protect depositors’ money, not to issue high-risk loans indiscriminately. "It’s not our preference to compete over a small group of borrowers," the executive said. "We are caught between regulatory compliance and prudent risk management. The government needs to help make more people creditworthy if broader lending is the goal."
