NRB governor initiates review of “blacklist” policy to boost investment

KATHMANDU: Governor of Nepal Rastra Bank, Dr. Bishwonath Paudel, has announced that the central bank has begun reviewing the provisions related to the “blacklist” system, recognizing it as one of the factors hindering investment in the country.

Speaking at the annual celebration of the Nepal Economic Journalists’ Association, Governor Paudel highlighted that despite abundant liquidity in the market, investment growth has not met expectations.

He stated that the central bank is taking measures to make monetary policy more flexible to encourage investment.

“Currently, we are reviewing the blacklist provisions, which have raised concern among many. Although liquidity is ample, credit growth has not matched expectations due to multiple factors, including the placement of some borrowers on the blacklist. Out of approximately 1.8–1.9 million borrowers in the country, around 150,000 have been blacklisted,” Governor Paudel explained.

The Governor further clarified that efforts are underway to address issues in the construction sector, where a single default by one group member could unfairly impact others.

He emphasized that the practice of undervaluing collateral during auctions and exploiting borrowers is being treated as corruption within the private sector, which the central bank will not tolerate.

Paudel also pointed out challenges in controlling illicit lending practices in private banks, unlike government institutions where regulatory intervention is easier. “We have discovered active intermediaries promising to arrange loans in exchange for bribes. I have instructed bank managers to investigate these cases thoroughly. Credit should flow in a transparent and fair environment, and any attempts to exploit collateral or take undue advantage of borrowers will be dealt with strictly,” he said.

On monetary policy, Governor Paudel noted that the first review did not set overly ambitious targets. He stressed the importance of ensuring that bank branches operate efficiently and profitably, particularly in urban areas, and that lending is directed to productive sectors to yield optimal returns.

“This process will continue, with the aim of guiding banks to channel loans to the right places for maximum return,” he added.