Stakeholders in Nepal have called for the establishment of an asset management company to address the growing challenges posed by bad loans and non-banking assets in the financial sector.
At a recent interactive program organised by the Confederation of Banks and Financial Institutions Nepal (CBFIN) in collaboration with Dolma Consulting, experts emphasised that such a company could enhance financial governance, promote sustainable development, and stabilise the economy.
The discussions highlighted the need for a transparent and responsible banking sector, particularly in light of the economic downturn following Covid pandemic, which has exacerbated issues related to loan repayments and asset liquidation.
Participants voiced concerns about the increasing accumulation of bad loans and non-banking assets, suggesting that immediate action is required to mitigate long-term risks to the banking system.
CBFIN President Upendra Poudel noted that while Nepal’s banking sector has been resilient, recent developments have created new challenges. Poudel pointed out the paradox of banks holding more real estate than cash, underscoring the necessity for an asset reconstruction company to allow banks to refocus on core activities.
Similarly, Rajesh Upadhyay, Senior Vice President of CBFIN, stressed the importance of timely assessment of risks associated with inactive loans and non-banking assets. Upadhyay called for effective government support in establishing the proposed asset management company.
The program included insights from various banking leaders and featured a presentation by Vinayak Bahuguna, former CEO of Asset Reconstruction India Ltd, who cautioned that while such companies are crucial, their success hinges on factors like financial stability, regulatory support, and skilled manpower.
The event brought together a wide range of participants from Nepal's banking sector, including senior officials from the Nepal Rastra Bank, further emphasising the collaborative effort needed to address these pressing financial challenges.
