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Margin loan investment by banks and financial institutions surged significantly in the fiscal year 2024/25, led by commercial banks. According to the Nepal Rastra Bank (NRB), total margin loan exposure reached Rs 140.7bn by the end of mid-July 2025, compared to Rs 90.09bn a year earlier. This represents an increase of Rs 50bn (56.17 percent) over the previous fiscal year.

While finance companies and development banks posted moderate growth, commercial banks accounted for a lion’s share of the expansion. Finance companies increased their margin loan portfolio by only 4.27 percent, from Rs 4.15bn to Rs 4.35bn, while development banks saw their margin loan exposure go up by 25.31 percent, from Rs 15.59bn to Rs 19.54bn. In contrast, commercial banks expanded their investment by a whopping 66.05 percent. Margin loan exposure of commercial banks expanded from Rs 70.03bn in mid-July 2024 to Rs 116.8bn in mid-July 2025.

In terms of portfolio, Nabil Bank has the largest margin loan exposure at Rs 16.76bn followed by Global IME Bank (Rs 12.3bn) and Kumari Bank (Rs 10.43bn). Similarly, in terms of growth, Machhapuchchhre Bank recorded the sharpest growth in margin loans with its portfolio expanding by 442.10 percent. The bank’s total margin loans increased from Rs 460m to Rs 2.53bn during the period. Similarly, Nepal SBI Bank’s margin loans grew by 207.15 percent to Rs 610m, up from Rs 200m a year earlier.

Agriculture Development Bank (192.66 percent), NMB Bank (144 percent), Laxmi Sunrise Bank (143 percent) and Kumari Bank (138.41 percent) also saw significant expansion in their margin loan portfolio during the period. Market analysts say improved investor confidence in the stock market  is the main reason behind expansion in margin lending portfolios of banks. Since return from the stock market is higher than interest rates offered by banks, investors are availing themselves of cheaper loans and investing in stocks, one analyst said. 

Nepal Rastra Bank has made arrangements for Indian nationals to bring an equivalent of USD 5, 000 in Indian currency during their visit to Nepal. 

With this new policy, tourism business in the border areas is expected to exceed further. 

Previously, business owners complained about the provision allowing only INR 20, 000.

The federal government, through the budget for the current fiscal year announced on May 29, has made it possible for travelers entering Nepal by air or land to bring foreign currency or travelers' cheque equivalent to five thousand US dollars that will be exchangeable in Nepal.

The central bank issued a public notice on August 26, allowing Nepali or foreign citizens to bring foreign currency up to USD 5, 000  in cash. 

Hari Pant, President of the Hotel and Tourism Entrepreneurs Association in Birgunj, shared that the provision allowing Indian tourists to bring Indian rupees equivalent to USD 5, 000  without customs declaration would provide relief to the local tourism entrepreneurs. 

Birgunj has more than 85 hotels, including four-star hotels. However, tourists have not been able to extend their stay as expected. 

Entrepreneurs in the tourism sector say that the local tourism industry is sustained largely by Indian tourists.

The economic growth rate has increased and inflation has decreased in the last Fiscal Year 2024/25 as compared to the previous fiscal year.

Nepal Rastra Bank (NRB) stated this in its report entitled Current Macroeconomic and Financial Situation of Nepal (Based on Annual Data (Mid-July 2025 of 2024/25) which was issued today. 

According to the central bank, the economic growth rate for 2024/25 has been estimated to be 4.61 percent. In the previous year the economic growth rate was 3.67 percent.

Agriculture, industry and service sectors are estimated to grow 3.28 percent, 4.53 percent and 4.21 percent respectively. The share of agriculture, industry and service sectors in GDP stands 25.16 percent, 12.83 percent and 62.01 percent respectively in 2024/25.

Gross domestic saving to GDP stands 6.55 percent in 2024/25. Ratio of gross fixed capital formation and gross national saving to GDP stands 24.07 percent and 36.24 percent respectively.

Annual average Inflation remained 4.06 percent in 2024/25. In the previous year annual average inflation was 5.44 percent.

The y-o-y consumer price inflation stood at 2.20 percent in mid-July 2025 compared to 3.57 percent a year ago.

Under the food and beverage category, the annual average consumer price index of vegetable sub-category increased 10.71 percent, ghee and oil 8.72 percent, pulses and legumes 7.90 percent and cereal grains and their products 6.13 percent while the annual average consumer price index of spices decreased 2.62 percent and meat and fish 0.34 percent.

The annual average non-food and services category inflation stood at 3.71 percent in 2024/25 compared to 4.64 percent a year ago. The y-o-y non-food and services category inflation stood at 4.12 percent in mid-July 2025 compared to 3.26 percent a year ago.

The NRB report stated that Balance of Payments remained at a surplus of Rs 594.54 billion compared to a surplus of Rs 502.49 billion last year.

Imports and exports increased 13.3 percent and 81.8 percent respectively. In the previous year, imports and exports decreased 1.2 percent and 3.0 percent respectively.

Remittances increased 19.2 percent in NPR terms and 16.3 percent in USD terms. During mid-June to mid-July 2025 remittance inflows stood at Rs. 189.11 billion, according to the report.

Gross foreign exchange reserves stood at 19.50 billion in USD terms. It is stated that this level of foreign exchange reserve is sufficient to cover merchandise and services imports for 15.4 months.

The broad money (M2) increased 12.5 percent in 2024/25. In the previous year M2 increased 12.9 percent.

Deposits at BFIs increased 12.6 percent amounting to Rs 7, 264 billion while private sector credit increased 8.4 percent amounting to Rs 5. 498 billion in 2024/25.

The installed capacity of electricity increased to 3, 591 Megawatt in 2024/25, which consists of 3, 390 Megawatt from hydroelectricity.

The total number of tourist arrivals increased by 1.7 percent to 1,147,834 in 2024/25.

Nepal Rastra Bank (NRB) has adopted a more flexible approach to direct sector lending by granting banks and financial institutions an additional year to meet mandatory credit flow targets for specific priority sectors.

Through an amendment to its Unified Directives for Banks and Financial Institutions, the central bank extended the deadline to meet minimum lending requirements in agriculture and small and medium enterprises (SMEs). Previously, commercial banks were required to meet these sectoral lending thresholds by mid-July 2027. With the revision, banks now have until mid-July 2028 to comply.

Under the new provision, commercial banks must gradually increase credit exposure in agriculture and SMEs to reach 15 percent of their total loan portfolio by mid-2028. The phased targets require banks to achieve 11 percent by mid-July 2025, 12 percent by mid-July 2026, 13 percent by mid-July 2027 and 15 percent by mid-July 2085. Previously, banks were expected to achieve 12 percent by this fiscal year, 13 percent by mid-2026 and 15 percent by mid- 2027.
Similarly, development banks are now required to channel at least 20 percent of their total loans into agriculture, cottage, small-scale industries, energy, and tourism by the extended deadline of mid-July 2028. Likewise, Class ‘C’ finance companies must disburse at least 15 percent of their total loans to these sectors by mid-July 2028.

NRB has also introduced flexibility for commercial banks that have already met the minimum lending requirement in the agriculture sector but are struggling to meet quotas in other areas. These banks are now allowed to allocate the shortfall to their area of expertise, provided the total lending across all targeted sectors meets the required percentage.

In addition, the central bank has allowed restructuring and rescheduling of loans up to Rs. 20m disbursed in agriculture, energy, and SMEs, if the borrower faces financial difficulties. The provision allows a one-time rescheduling based on the borrower’s request and a detailed assessment of the business plan and cash flow, provided at least 10 percent of the due interest has been recovered.

However, NRB has imposed strict conditions on such restructuring. As per the new provision, restructuring must be completed by mid-September, the restructured loan must retain at least the same risk classification as of mid-December last year and previously made loss provisions cannot be reversed during restructuring.

After much delay and several twists and turns, Nepal Rastra Bank (NRB) finally got a new governor, Biswo Poudel, about a month ago. There was a 46-day gap between the retirement of the previous governor and the appointment of his successor. Although the appointment came late, the central bank has now secured a well-qualified leader. Poudel is a respected economist with deep knowledge of Nepal’s economic history and the foresight to prepare for the future, making him a fitting choice to lead the central bank of the country at this critical time.

Poudel possesses a deep understanding of Nepal’s geography, cultural dynamics, social structure and the foundations of national development. He is well-versed in national planning, business, economics and the broader financial and economic landscape. 

The governor brings with him a wealth of experience and experience, having already served as vice-chairperson of the National Planning Commission, senior economic advisor to the Ministry of Finance and chair of the Board of Governors at ICIMOD, adviser to the International Labour Organization (ILO), led regional forums under the Colombo Plan and UNESCAP, and published research articles in several international economic journals. At the time of appointment as the governor, Poudel was a visiting associate professor at the Kathmandu University School of Management.

His academic and professional expertise spans natural resource economics, labour markets and economic history—areas closely aligned with Nepal’s long-term development priorities.

Over the years, he has closely studied monetary policies and the functioning of banks and financial institutions (BFIs). The business community, economic stakeholders, the stock market and other financial sectors have welcomed his appointment.

A former Minister of State for Finance and economist, Udaya Shumsher Rana, remarked that since the appointment of the new governor, all eyes are on the central bank, with its new leadership appearing more influential than even the Ministry of Finance.

Widespread optimism following his appointment suggests a hopeful outlook for the country’s economic progress in the days to come.

If this momentum continues, Poudel’s five-year tenure is likely to have a positive and lasting impact on the national economy.

This is an important and encouraging development for the public, as key aspects of the economy—such as controlling inflation, ensuring stable and positive economic activity, generating employment, keeping industries running smoothly and fostering a harmonious relationship between banks and the business community—largely depend on the leadership of the NRB. With Poudel at the helm, there is a sense of optimism and satisfaction among all concerned, at a time when the private sector, BFIs and the broader economic landscape are facing numerous challenges.

Businesses and industries have been struggling to recover fully since 2019, when a Covid-19 pandemic hit the country and consigned its economy to sickbed. Against this backdrop, the NRB leadership must prioritize the revival of these sectors and focus on correcting structural economic imbalances. This is what the country needs—and what the people expect.

The country faces a multitude of economic challenges. The central bank had long been in need of a capable scholar, who could address these pressing issues with expertise and vision. Economic recovery cannot be achieved through rhetoric alone; it demands strong leadership, a positive mindset and dedicated effort. Governor Poudel is surely aware of this reality. With the support of NRB’s competent team, let’s hope, he manages to work diligently toward the nation’s economic development and progress.

The author, a member of the Supreme Court Bar, has been practicing corporate law for around three decades

Nepal Rastra Bank has started preparations for the formulation of monetary policy for the fiscal year 2025-26. The newly-formed Monetary Policy Committee has an uphill task of focusing on global practices, the context of Nepal and the path that it should take in the coming days against the backdrop of permanent pegging of Nepali currency with Indian currency and the absence of good governance in the country.

What is a monetary policy? 

Before delving further, let’s begin with a key question: what is monetary policy?

Monetary policy is related to monetary or currency matters such as cash reserve ratio, statutory liquidity ratio, open market operations, repurchase obligations. It affects the money supply in the economy. 

Who drafts the monetary policy? The central bank of a country—the Nepal Rastra Bank in the case of our country. 

When talking about this policy, another related policy also comes to mind and that’s fiscal policy. This policy is used to monitor and influence the economy of a nation.

Fiscal policy is the “sister strategy” of monetary policy through which the central bank influences the money supply of the nation. Formulated by the Ministry of Finance, it deals with fiscal matters such as government revenue (tax policies, non-tax matters like disinvestment, debt collection, service charges, etc) and expenditure matters—grants, salaries, pensions, money spent on creating capital assets like roads, bridges and the like).

The twin policies deal with inflation (the rate of increase in prices over a given period of time). The main objectives of monetary policy are as follows:

To check inflation or deflation (increase and fall in prices, respectively) or price stability in the country, to safeguard the country’s gold reserves, exchange rate stability, elimination of cyclical fluctuations, achievement of full employment and accelerating economic growth, etc.

Dealing with inflation: A tight monetary policy that reduces money supply in the system—that is one way of dealing with escalating prices.

Dealing with devaluation: This is done by increasing money supply in the system, by adopting an easy money policy and a cheap money policy.

When the economy is devastated by a war or hampered by a recession, a dispute or disruption in the economic horizon is very beneficial. In such situations, a country may adopt a dear/cheap money policy.

There is also a distinct difficulty and confusion when it comes to grasping monetary policy. Some people tend to think that dear money means that its value is high in terms of goods and services i.e prices are low while some others think cheap money means that the value of money is low and prices have increased.

Which money policy is better: It all depends on the economic situation facing a country. Interest rate is an important tool for the implementation of an economic policy. There are times when an economic policy demands that the interest rate in the money market be kept low and sometimes it demands that the interest rate be kept high for fulfilling certain economic objectives.

After this discussion, we are now in a position where we can classify these two policies based on their respective uses. We can say that we can identify the time and reason i.e when and why we use one of these two policies.

A tight money policy is preferred when the balance of payments is heavy against the country or is in danger of remaining unfavorable and when there is reckless or unwise investment from industries/industrialists and when credit creation by the banks exceeds all prudent limits.

Limitations: Monetary policy has to face many difficulties, especially in underdeveloped countries like Nepal. The existence of a large non-monetized sector—one-third of the economy in underdeveloped countries—can seriously limit the scope of use of monetary weapons, but two-thirds of the economy provides a fairly large opportunity for monetary action. Moreover, in such countries, currency occupies a relatively more important place than bank deposits. 

Recently appointed Governor of Nepal Rastra Bank, Biswo Poudel, has raised concerns over the concentration of bank and financial institution loans among a limited group of individuals and business households. Speaking during a discussion on the Bank and Financial Institutions (First Amendment) Bill in the Finance Committee, Governor Poudel emphasized the growing debate around the unequal distribution of banking loans and the need to clearly separate the roles of bankers and businesspersons.

A key concern is that a significant share of financial sector loans is directed toward high-income individuals and households, while low-income groups and rural communities remain largely underserved. This disparity has reignited calls to reform the banking structure, including proposals to limit the overlap between those who run banks and those who borrow from them.

Although the number of banks and financial institutions in Nepal has decreased—largely due to the central bank’s push for mergers and acquisitions since 2010—branch expansion has continued nationwide, increasing visibility at the local level. This expansion has intensified competition in the banking sector, often with a strong focus on profit.

On the surface, banks appear to be serving various segments of society. However, credit access remains skewed, with banks primarily extending loans to urban elites, established industrialists, and salaried employees—while collecting deposits from rural areas. Governor Poudel publicly stated this disparity, noting that banks are not providing adequate financial support to farmers, low-income earners, and those lacking formal documentation.

The consolidation of banks through mergers has enabled them to set interest rates at their discretion, which in some cases has led to unhealthy competition or even informal agreements that exclude weaker borrowers. While banks continue to report ample liquidity, reluctance to lend—especially to small and medium enterprises (SMEs)—is contributing to economic stagnation and job loss. Many such businesses, key drivers of employment and production, are struggling to access credit.

This lending imbalance has also contributed to a rise in non-performing loans. Currently, bad loans account for around five percent of total bank lending. The inability of the lower economic class to access institutional credit has pushed many into the hands of informal lenders charging high interest rates, commonly referred to as ‘meter interest’. This, observers argue, is a result of institutional failure to provide inclusive financial services.

Nepal has long been recognized as one of South Asia’s most unequal economies. Over the past four decades—alongside the growth of financial institutions—economic inequality has widened. While banks have helped the wealthy manage and grow their assets, they have done little to address the financial needs of the poor. Critics argue that those with control over banks are often selected from elite business circles, giving preferential treatment to their close associates when it comes to loan disbursement.

In this context, the proposed amendment to the Bill—to separate the roles of bankers and businesspersons—has gained renewed attention. Although discussions have stalled in the past, Governor Poudel’s recent remarks have brought the issue back into focus.

According to data from Nepal Rastra Bank, the total number of deposit accounts in banks and financial institutions has reached over 511,000—exceeding the population. However, this figure does not indicate universal financial access, as many individuals hold multiple accounts. Significantly, only about four percent of account holders have access to credit, while the remaining 96 percent do not, often due to a lack of collateral or financial literacy.

Governor Poudel’s comments underscore the need for more equitable access to financial resources, particularly for those who contribute through remittances or small rural deposits but remain excluded from formal credit. While some bankers have generated substantial profits, returns for shareholders remain modest, prompting questions about wealth distribution within the sector.

Ultimately, the broader concern is that economic development and poverty reduction will remain out of reach unless financial access is expanded equitably. Past assumptions—such as increased bank branches equating to increased financial inclusion—are misleading. What matters more is who controls capital and who benefits from credit distribution. Most banks are overseen by businesspersons, and those within their networks often enjoy easier access to loans.

The year-on-year consumer price inflation stood at 2.77 percent in mid-May 2025 compared to 4.40 percent a year ago, Nepal Rastra Bank (NRB) stated in its report 'Current Macroeconomic and Financial Situation of Nepal (Based on Ten Months Data Ending Mid-May 2024/25)' today.  

Similarly, food and beverage inflation stood at 1.52 percent whereas nonfood and service inflation stood at 3.45 percent in the review month. During the same period in the previous year, the price indices of these groups had increased 6.41 percent and 3.09 percent, respectively.

During the review month, the year-on-year price index in rural areas increased 3.21 percent, while in urban areas, it rose 2.61 percent.

Based on provinces, in the review month, the year-on-year consumer price inflation in Koshi Province is 4.29 percent, Madhesh Province 2.81 percent, Bagmati Province 2.40 percent, Gandaki Province 2.23 percent, Lumbini Province 2.15 percent, Karnali Province 2.21 percent, and Sudurpashchim Province 3.14 percent.

In the review month, the year-on-year consumer price inflation in the Kathmandu Valley, Terai, Hill and Mountain region surged to 2.64 percent, 2.64 percent, 2.65 percent and 4.01 percent respectively.

The year-on-year wholesale price inflation stood at 3.95 percent in mid-May 2025 compared to 5.68 percent a year ago. 

The year-on-year  wholesale price of consumption goods increased 10.89 percent while intermediate goods and capital goods increased 0.10 percent and 2.73 percent respectively.

The year-on-year  wholesale price of construction material increased 2.67 percent in the review month, the report stated.

The current account remained at a surplus of Rs 210.22 billion in the last nine months of the current fiscal year 2024/25 compared to a surplus of Rs 179.83 billion in the same period of the previous year.

In US Dollar terms, the current account registered a surplus of 1.55 billion in the review period against a surplus of 1.35 billion in the same period last year.

The Nepal Rastra Bank (NRB) stated this in its Review of the Monetary Policy of the Current Fiscal Year 2024/25.

The Balance of Payments (BOP) remained at a surplus of Rs 346.23 billion in the nine months of the current Fiscal Year 2024/25 compared to a surplus of Rs 365.16 billion in the same period of the previous year.

In the US Dollar terms, the BOP remained at a surplus of 2.55 billion in the review period compared to a surplus of 2.75 billion in the same period of the previous year.

The NRB stated that in the review period, net capital transfer amounted to Rs 7.71 billion. In the same period of the previous year, such transfers amounted to Rs 4.78 billion. Similarly, in the review period, Rs 8.96 billion foreign direct investment (equity only) was received. In the same period of the previous year, foreign direct investment inflow (equity only) amounted to Rs 6.49 billion.

Foreign Exchange Reserves

Gross foreign exchange reserves increased 18.9 percent to Rs 2426.84 billion in mid-April 2025 from Rs 2041.10 billion in mid-July 2024. In the US dollar terms, the gross foreign exchange reserves increased 15.4 percent to 17.63 billion in mid-April 2025 from 15.27 billion in mid-July 2024.

Of the total foreign exchange reserves, the reserves held by NRB increased 15.6 percent to Rs 2136.46 billion in mid-April 2025 from Rs 1848.55 billion in mid-July 2024. Reserves held by banks and financial institutions (except NRB) increased 50.8 percent to Rs 290.38 billion in mid-April 2025 from Rs 192.55 billion in mid-July 2024.

The share of Indian currency in total reserves stood at 20.4 percent in mid-April 2025.

Foreign Exchange Adequacy Indicators

Based on the imports of nine months of 2024/25, the foreign exchange reserves of the banking sector are sufficient to cover the prospective merchandise imports of 17.1 months, and merchandise and services imports of 14.2 months.

The ratio of reserves-to-GDP, reserves-to-imports and reserves-to-M2 stood at 39.7 percent, 118.7 percent and 32.8 percent respectively in mid-April 2025.

Such ratios were 35.8 percent, 108.6 percent and 29.3 percent respectively in mid-July 2024.

Economist Bishwo Poudel has assumed the office of the Nepal Rastra Bank (NRB) as its 18th Governor on Tuesday. His appointment, following nearly one and half months of leadership vacuum and a politically charged process, has placed him under intense scrutiny.

As a former Nepali Congress (NC) parliamentary candidate, Poudel steps into a role that demands not only economic acumen but also a clear demonstration of independence. He must now navigate a complex landscape shaped by political expectations, economic stagnation, and international obligations. The challenges ahead are significant and will require bold, balanced, and credible policy responses to restore confidence, revive growth and protect the NRB’s integrity as an autonomous institution.
 

Poudel’s political background has reignited concerns about the politicization of the NRB governorship—a role that, while historically influenced by political appointments, is expected to rise above party interests. The prolonged selection process reflects a troubling prioritization of political loyalty over institutional continuity. For Poudel, the first and perhaps most important test is to assert his independence. He must earn public and investor trust by making transparent, evidence-based decisions that put the country’s economic well being above political considerations. Failing to do so risks deepening skepticism about the central bank’s autonomy and complicating efforts to stabilize the economy.

One of the most urgent challenges before him is reviving credit growth. Although more than Rs 600bn in investable funds are sitting idle in the banking system and interest rates are at record lows, credit disbursement has remained weak for the past many months. This signals a deeper issue: a lack of confidence among borrowers and subdued demand for investment. The resulting liquidity trap has stifled economic activity and blunted the impact of monetary policy. To address this, Poudel will need to introduce targeted measures to stimulate lending. This could include easing regulatory barriers, supporting innovative financial products, and channeling credit into high-potential sectors such as agriculture, tourism, and small and medium enterprises (SMEs). Working closely with banks and financial institutions to better assess and manage lending risks can help mobilize this idle capital into productive use, while unlocking growth and job creation.

Another critical issue is Nepal’s inclusion on the Financial Action Task Force (FATF) greylist because of the shortcomings in anti-money laundering (AML) and counter-terrorism financing efforts. This designation will damage Nepal’s global financial standing, discourage foreign investment and hamper integration with international markets. The new governor must work closely with the Ministry of Finance and relevant regulatory bodies to strengthen the AML framework, enhance enforcement and ensure alignment with international standards. Removal from the greylist would not only restore investor confidence but also signal the NRB’s capacity to meet complex global obligations.

Despite a relatively strong external sector—marked by healthy remittance inflows, solid foreign exchange reserves and a balance of payments surplus—domestic economic activity has remained sluggish since the lifting of the post-covid stimulus. This disconnect highlights deeper structural challenges such as bureaucratic red tape, policy uncertainty and weak engagement with the private sector. Poudel must prioritize efforts to rebuild private sector confidence. Targeted incentives, such as credit guarantees for SMEs or support for green investments, could stimulate private sector involvement and energize the real economy. It is important to strike the right balance: reviving growth without stoking inflation, and implementing short-term stimulus that aligns with long-term development goals.

By promoting forward-thinking policies and fostering collaboration across institutions, Poudel has the chance to steer Nepal’s economy toward. His legacy at the central bank will be defined not just by the policies he takes, but by his ability to preserve the central bank’s independence and credibility.

Newly appointed Governor of Nepal Rastra Bank Biswo Poudel has decided to print new notes of Rs 500 and 1000.

Poudel, who took the oath of office and secrecy amidst a ceremony held at the Supreme Court, said so after assuming the office on Wednesday.

He said that he will move ahead by coordinating with everyone in order to make the country’s economy dynamic.

Chief Justice Prakash Man Singh administered the oath of office and secrecy this morning.

The government on Tuesday appointed Poudel as the 18th Governor of Nepal Rastra Bank (NRB). 

The decision to appoint Poudel as the new Governor of Nepal Rastra Bank was made during a Cabinet meeting held on Tuesday evening at the Prime Minister’s official residence in Baluwatar.

Newly appointed Governor of Nepal Rastra Bank Biswo Poudel took the oath of office and secrecy on Wednesday.

He took the oath of office and secrecy before Chief Justice Prakash Man Singh Raut amidst a ceremony held at the Supreme Court.

The government on Tuesday appointed Poudel as the 18th Governor of Nepal Rastra Bank (NRB). The decision was made during a Cabinet meeting held on Tuesday evening at the Prime Minister’s official residence in Baluwatar.

Three names were recommended for the position by a committee led by Deputy Prime Minister and Finance Minister Bishnu Paudel. The committee shortlisted Poudel, Acting Governor Neelam Dhungana and former Secretary Dinesh Bhattarai for the role earlier on Tuesday. The governor’s post had remained vacant since April 7, after the end of the previous term.

Before the Cabinet decision, Prime Minister KP Sharma Oli and Nepali Congress President Sher Bahadur Deuba held discussions regarding the appointment. Initially, Gunakar Bhatta, Executive Director at NRB, was considered for the role, reportedly with backing from Deuba. However, consensus could not be reached, and Deuba subsequently proposed Poudel as a compromise candidate.

As Governor, Paudel will serve as the chief economic advisor to the government and play a key role in formulating monetary policy in line with fiscal policy.

He previously served as the Vice-chair of National Planning Commission (NPC), Senior Economic Advisor at the Ministry of Finance, Chairperson of the board of governors of ICIMOD, president of the Colombo Plan council and chair of Regional Economic Cooperation and Integration (RECI) in Asia and the Pacific. Additionally, he also served as the Chief Economic Advisor of Confederation of Nepalese Industries (CNI), and a member of the Board of Directors of Sanima Bank and Sanima Middle Tamor Hydropower Company.

He also ran as a Nepali Congress candidate from Chitwan-1 in the 2022 parliamentary elections but lost to Rastriya Swatantra Party (RSP)’s Hari Dhakal.

Earlier, advocates Pratibha Upreti and Bishal Thapa had filed the writ at the Supreme Court, demanding that Poudel be disqualified from the position. However, the Supreme Court administration dismissed the writ. The advocates had submitted an application to reverse the writ rejection decision, but the court did not entertain the request.

The dividend capacity of commercial banks has reduced despite a 1.4 percent growth in net profit over the first nine months of fiscal year 2024/25. The third-quarter data of banks and financial institutions released by the Nepal Rastra Bank (NRB) shows the average Return On Equity (RoE) of commercial banks dropped to 7.73 percent over the review period, down from 8.34 percent in the same period of the previous fiscal year. The average RoE was 13.17 percent in the third quarter of 2022/23.

RoE refers to the return that investors receive on their total capital. An average RoE of 7.73 percent means investors received a return of Rs 7.73 for every Rs 100 invested. A lower RoE can indicate that the company is struggling to earn a high return on the capital raised from investors. Twelve out of 20 commercial banks in the country saw their RoE drop in the review period, while eight managed to increase it. Only six banks—Everest Bank, Standard Chartered, NMB, Sanima, Nepal Bank, and Nabil Bank—have RoE in double digits. Everest Bank recorded the highest RoE of 15.82 percent in the third quarter ending mid-April, while NIC Asia has the lowest at just 0.71 percent.

Data shows Nabil Bank, Global IME Bank, Nepal Investment Mega Bank, Everest Bank, NMB Bank, Sanima Bank, Machhapuchhre Bank, and Nepal Bank managed to increase their RoE in the review period, while Prime Commercial Bank, Standard Chartered Bank, Himalayan Bank, Prabhu Bank, Laxmi Sunrise Bank, Agricultural Development Bank, Nepal SBI Bank, Rastriya Banijya Bank, Citizens Bank, Siddhartha Bank, Kumari Bank, and NIC Asia Bank saw their RoE drop.

Distributable profits plummet

The distributable profits of commercial banks have also turned negative. The combined distributable profit of 20 commercial banks as of the third quarter of fiscal year 2024/25 is negative by Rs 1.67bn. In the same quarter of 2022/23, these banks had distributable profits exceeding Rs 15.28bn. Specifically, the distributable profits of Kumari Bank, Himalayan Bank, NIC Asia Bank, Prabhu Bank, Nepal Investment Mega Bank and Rastriya Banijya Bank are collectively negative by more than Rs 22bn. As a result, even though 14 other banks have positive distributable profits, the overall figure for the banking sector remains negative.

By the end of the third quarter, six banks have negative distributable profits. Four others have distributable profits below three percent, which means they are highly unlikely to pay dividends to their shareholders. Among the 20 commercial banks in the country, Everest Bank has the highest dividend-paying capacity at 34.09 percent, followed by Standard Chartered Bank at 19.35 percent and Sanima Bank at 18.92 percent. Only eight banks have a dividend capacity exceeding 10 percent.

Nepal Rastra Bank (NRB) senior Deputy Governor Nilam Dhungana Timsina has been appointed as the Acting Governor.

Timsina was given the responsibility by the Finance Ministry after the recommendation committee formed for the appointment of the Governor delayed the recommendation process.

Deputy Prime Minister and Finance Minister Bishnu Prasad Poudel has appointed Timsina as the Acting Governor in accordance with Section 27 of the Nepal Rastra Bank Act 2058 BS.

A three-member committee comprising former Governor Bijaya Nath Bhattarai and economist Bishwa Poudel has been formed under the coordination of Finance Minister Poudel to recommend the appointment of Governor.

The current account remained at a surplus of Rs.166.80 billion in the review period compared to a surplus of Rs.162.52 billion in the same period of the previous year, Nepal Rastra Bank (NRB) stated in its 'Current Macroeconomic and Financial Situation of Nepal (Based on Seven Months Data Ending Mid-February, 2024/25) Report'.

In the US Dollar terms, the current account registered a surplus of 1.24 billion in the review period against a surplus of 1.22 billion in the same period last year. In the review period, net capital transfer amounted to Rs.5.83 billion.

In the same period of the previous year, such transfer amounted to Rs.3.80 billion. Similarly, in the review period, Rs.7.45 billion foreign direct investment (equity only) was received.

In the same period of the previous year, foreign direct investment inflow (equity only) amounted to Rs.5.19 billion.

Balance of Payments (BOP) remained at a surplus of Rs.284.41 billion in the review period compared to a surplus of Rs.297.72 billion in the same period of the previous year.

In the US Dollar terms, the BOP remained at a surplus of 2.11 billion in the review period compared to a surplus of 2.24 billion in the same period of the previous year.

Foreign Exchange Reserves Gross foreign exchange reserves increased 16.1 percent to Rs.2369.08 billion in mid-February 2025 from Rs.2041.10 billion in mid-July 2024.

In the US dollar terms, the gross foreign exchange reserves increased 11.7 percent to 17.05 billion in mid-February 2025 from 15.27 billion in mid-July 2024.

Of the total foreign exchange reserves, the reserves held by NRB increased 13.9 percent to Rs.2105.14 billion in mid-February 2025 from Rs.1848.55 billion in mid-July 2024.

Reserves held by banks and financial institutions (except NRB) increased 37.1 percent to Rs.263.93 billion in mid-February 2025 from Rs.192.55 billion in mid-July 2024.

The share of Indian currency in total reserves stood at 22.0 percent in mid-February 2025.

Foreign Exchange Adequacy Indicators Based on the imports of seven months of 2024/25, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 17.2 months, and merchandise and services imports of 14.4 months.

The ratio of reserves-to-GDP, reserves-to-imports and reserves-to-M2 stood at 41.5 percent, 120.3 percent and 32.5 percent respectively in mid-February 2025.

Such ratios were 35.8 percent, 108.6 percent and 29.3 percent respectively in mid-July 2024.

Nepal Rastra Bank (NRB) has shortlisted six audit forms for Extensive Asset Quality Review (Loan Portfolio Review) of 10 commercial banks of the country. The shortlisted companies include audit firms from Sri Lanka, India, Bangladesh and Nepal. 

According to a notice from the NRB, Deloitte Partners from Sri Lanka, Howladar Yunus & Co from Bangladesh, and KPMG Assurance & Consulting Services and MSKA & Associates from India have been shortlisted for the loan portfolio review of 10 Nepali commercial banks. Proposals from three venture entities have also been shortlisted. They include Subedi & Associates of Nepal, and Mehra Goel & Co and JKSS & Associates of India; and BK Agrawal of Nepal and SR Batliboi & Associates. 

Subedi & Associates is the lead partner in the joint venture of three firms. 

The NRB is selecting an international audit firm for loan quality review as per a condition set by the International Monetary Fund (IMF) while approving the Extended Credit Facility (ECF) for Nepal. Expressing concerns over the quality of loans disbursed by major banks, the potential risks associated with non-performing assets (NPAs) and the overall impact on the country’s financial stability, the IMF had set assessment of loan quality of major Nepali banks as a condition for its support.  

This is the second time that the NRB initiated the process of procuring the service of international audit firms for the loan portfolio review of 10 major banks. In March last year, NRB invited proposals from foreign audit consultancies. Out of five firms shortlisted at that time, only KPMG India was selected for the financial proposal round. But after KPMG submitted a proposal with costs exceeding the estimated budget, NRB canceled the entire process.

The assessment was supposed to begin by April 2024 and be completed by Dec 2024, with a corrective action plan to be implemented from Feb 2025 based on the findings. 

After the IMF expressed concern over the delay, the NRB reissued the call for proposals in December. The central bank has also revised the qualification criteria for the selection process. The minimum score required for qualification of the proposal has been reduced from 70 to 60. The evaluation criteria include 50 percent for qualifications, 40 percent for experience and 10 percent for capability.

Ten commercial banks with highest credit disbursement as of the last fiscal year (mid-July) will have their loan portfolio assessed by the selected audit firm. They include Global IME, Nabil Bank, Nepal Investment Mega Bank, Kumari Bank, NIC Asia Bank, Laxmi Sunrise Bank, Rastriya Banijya Bank, Himalayan Bank, Prabhu Bank Agricultural Development Bank.

These banks had disbursed a total of Rs 2,896bn in loans as of mid-July last year.