Credit Expansion Necessary for Economic Growth Target

The government has set a target of achieving 6% economic growth and keeping inflation within 5.5% for the upcoming fiscal year 2081/82. Bankers and the private sector have stated that 10 to 11% credit expansion is necessary to achieve this economic growth.

Sunil KC, president of the Nepal Bankers' Association, mentioned that increasing internal debt will not pressure investable resources. However, he argued that banks cannot expand credit due to the growing pressure on primary capital.

In the current fiscal year, the government aimed for 11.5% credit expansion through monetary policy to achieve its economic growth target. However, only NPR 246 billion of credit has been expanded so far. Banks require NPR 45 billion in primary capital for the necessary credit expansion. Increased non-performing loans and interest capitalization have led many banks to incur retained losses.

Bankers' Association President KC emphasized the need for the central bank's facilitation to achieve economic growth. The central bank has agreed to address the capital issues through tools other than rights shares. Banks need to manage capital through instruments like preference shares. Therefore, necessary steps must be taken to facilitate credit expansion and support economic growth.