‘Making doing business environment more conducive a must’

 Kathmandu, Jan. 3

Minister for Industry, Commerce and Supplies, Damodar Bhandari, has pledged the government's commitment to the changes in policies and laws, including the constitution of the country, to make the doing business environment more conducive.

Speaking at the fifth Annual General Assembly of the Confederation of Banks and Financial Institutions in Nepal (CBFIN) in Kathmandu on Friday, Minister Bhandari said that the government was ready to cooperate and collaborate with the financial sector.

According to Minister Bhandari, while banking services have reached all local levels, banks are yet to explore opportunities beyond managing social security allowances and government transactions in these areas. "Operating accounts for government transactions and salaries at the local level is being labelled as financial inclusion, which is not enough," he said while stating that some policies needed to be reformed and replaced with new ones.

He criticised the banks and financial institutions (BFIs) and said that the country has a situation in which farmers do not get a loan from BFIs easily when they need it the most.

He also said that the government is working to make all possible changes and adjustments to facilitate private-sector business and attract domestic and foreign investment. "What did the banks and financial institutions (BFIs) do with the profits they made from high interest rates during yester years? It's not fair that all other businesses are in trouble and BFIs are reaping benefits," he stated.

According to Minister Bhandari, although industrial enterprise and other laws have provisions for concessions to the entrepreneurs, it was being checked by the annual economic acts.

Speaking on the occasion, the Chairman of the high-level Economic Reform Commission, Rameshwore Khanal, said that the Nepali economy has multiple paradoxes. "The banking sector has good regulation but it is struggling with growing non-performing loans. There is enough liquidity in the market but revenue is low. We need to find solutions to such challenges," he said.

Vice Chairman of the National Planning Commission, Prof. Dr. Shiva Raj Adhikari, said that the country was in need of support from the private sector in fulfilling its development aspirations.

Upendra Paudel, Chairman of the CBFIN, said that the banking sector was currently navigating one of the most challenging periods in its history. "While we take pride in improvements in the external economic environment, the internal economy remains fragile," he said while adding, "Widespread pessimism among investors, entrepreneurs, and businesses has hindered investment and credit expansion, even with adequate liquidity available at minimal interest rates. This has slowed economic and banking activities significantly."

According to Paudel, the sector is also grappling with unexpected declines in profitability, prompting banking investors to seek safer alternatives outside the industry. Rising operational costs, shrinking profits, increasing non-performing loans, sluggish sales of non-banking assets, and a growing exodus of skilled professionals have compounded the challenges.

He suggested revamping the capital expenditure system to enhance the efficiency of implementing plans, policies, and programmes and focusing on expanding the tax base rather than increasing tax rates.

Likewise, he also stressed the need for creating policies and an enabling environment to attract foreign investment into banks and financial institutions. According to him, the Banking and Financial Institution Act needs an amendment to make it more conducive to investment and business.

Published in The Rising Nepal daily on 4 January 2025.