Governor Paudel Warns of Loan Concentration in Hands of a Few, Urges Legal Reform

Nepal Rastra Bank Governor Dr. Bishwanath Paudel has expressed concerns that a significant portion of bank loans might have been concentrated in the hands of a few individuals. Speaking during a meeting of the Parliamentary Finance Committee on Monday regarding the proposed amendment to the Bank and Financial Institutions Act (BAFIA), he urged lawmakers to thoroughly consider the matter while drafting the law.

According to Dr. Paudel, a recent study revealed that out of 1.94 million borrowers, just 0.01% have received 3.9% of the total loan volume. He warned that the trend indicates a possible centralization of credit flow, which should be closely examined by parliamentarians.

He raised several critical issues—should directors be allowed to take loans from banks, if yes, how much? What qualifies someone as a "director"? Should there be a clear separation between bank operators and business owners? Dr. Paudel emphasized that while other countries have addressed such matters through legislation, Nepal must also make firm legal decisions through its lawmakers.

He stressed that many challenges currently seen in the financial system should be legally addressed in the revised BAFIA bill. “There is a real concern that loans may have gone into the hands of a few. We must analyze whether that benefits productivity or undermines the core principles of state governance,” he said.

The Governor underlined that loan distribution and the rights of borrowers must be clearly and legally defined in the BAFIA framework, as it is a crucial issue impacting economic fairness and governance.