The appointment of Biswo Nath Poudel as the Governor presents both significant opportunities and formidable challenges for Nepal’s economic governance. With a PhD in Economics from one of the world’s most prestigious academic institutions in the US and extensive experience in high-ranking government positions, Poudel brings substantial academic credentials and policy expertise to his new role as the chief of Nepal Rastra Bank, the central bank of the country. While his political affiliation with Nepali Congress President Sher Bahadur Deuba has drawn scrutiny, such connections are not inherently disqualifying in Nepal’s politico-economic context. More importantly, his esteemed economic qualifications position him to address the systemic failures that have long constrained Nepal’s monetary and fiscal policy frameworks.
At the core of these challenges lies Nepal’s dysfunctional fiscal architecture, characterized by rigid bureaucratic processes, rent-seeking behavior and a fundamental disconnect between policy objectives and implementation. The historical predominance of short-term political calculations over sound economic management has severely weakened the synergy between fiscal and monetary policy, undermining prospects for sustainable economic growth. Poudel’s most pressing task is to recalibrate this relationship by instilling greater discipline in fiscal operations while enhancing the NRB’s capacity to respond proactively to economic shocks and risks. This requires dismantling the rooted patronage networks that have distorted policy priorities and replacing them with evidence-based decision-making processes.
The liberalization of Nepal’s financial sector, while generating substantial business opportunities, has also fostered oligopolistic practices among business conglomerates. These entities have exploited regulatory gaps to establish cross-holdings across banking, insurance and investment ventures, engaging in market-distorting practices that marginalize smaller enterprises, which are important engines of growth. With single promoters controlling disproportionate shares of outstanding loans, some exceeding an unthinkable amount of hundred and thousand crores and exerting undue influence over regulatory appointments, the integrity of financial oversight has been severely compromised. Poudel must prioritize comprehensive risk assessments across all banking and financial institutions (BFIs), enhanced transparency in financial disclosures and stricter insulation of regulatory bodies from corporate interference.
NRB reports of April 2025 reveal that sectoral credit allocation patterns have profound structural imbalances that hinder economic diversification. The concentration of 20.75 percent of total advances in wholesale/retail trade contrasts sharply with the mere 12.43 percent allocated to agriculture, despite the latter’s quarter share of GDP. Meanwhile, term loans dominate the lending portfolio at 37.32 percent, reflecting excessive exposure to long-term, capital-intensive projects at the expense of more productive investments. The persistent shortfall in deprived sector lending remaining stagnant at 5.85 percent against regulatory targets and widespread misallocation of these funds to ineligible borrowers further exemplify systemic governance failures. This development occurs against a backdrop of systemic financial vulnerabilities, with non-performing loans (NPLs) escalating by 39.93 percent to Rs 180bn during the 2023-2024 reporting period.
A stark disparity emerges in asset quality between state-owned and private financial institutions, where government banks reported Rs 28.29bn in NPLs compared to Rs 151.72bn in the non-state banking sector. The aggregate commercial bank lending portfolio reached Rs 4,491.86bn, disproportionately dominated by private banks (Rs 3,825.81bn) relative to their state bank counterparts (Rs 666.05bn). The microfinance sector’s deviation from its original mission of rural financial inclusion into focused commercial operations, along with the politicization of cooperative institutions, has exacerbated financial exclusion. Meanwhile, the dangerous practice of banks financing secondary market speculation introduces unnecessary volatility into the financial system. Addressing these issues demands rigorous utilization audits, stress-testing of sectoral exposures and stricter due diligence on investments from opaque jurisdictions.
Poudel’s governorship represents a rare opportunity to reorient Nepal’s financial sector toward equitable capital allocation and sustainable development. Success will depend on his ability to transcend political constraints, challenge entrenched interests and implement technically sound reforms. By restoring the integrity of monetary policy and realigning credit flows with developmental priorities, his leadership could mark a turning point in Nepal’s economic trajectory, provided he demonstrates the necessary resolve to confront the systemic pathologies that have long hindered progress.
