Kathmandu, July 5: Chief Executive Officer (CEO) of Nabil Bank, Manoj Gyawali, has said that the government’s failure to make timely payments to construction contractors is placing serious pressure on Nepal’s banking system.
Speaking at a discussion on the upcoming monetary policy held by the House of Representatives’ Finance Committee on Sunday, Gyawali warned that delays in government payments and stalled construction contracts could lead to a sharp rise in non-performing loans (NPLs).
He noted that banks have extended nearly Rs. 500 billion in loans to the construction sector alone and urged the government to address the problems faced by contractors without delay. He also called on the central bank to introduce measures in the upcoming monetary policy to facilitate the payment process.
According to Gyawali, timely government payments or alternative arrangements—such as transferring stalled contracts—would help borrowers manage their loans more effectively and ease pressure on the financial system.
Presenting figures on the banking sector’s tax contributions, Gyawali said banks pay approximately Rs. 37–38 billion in income tax annually, accounting for around 13 percent of the country’s total income tax revenue.
“The banking sector currently contributes nearly 13 percent of total income tax revenue. We pay Rs. 37–38 billion in income tax every year. However, existing regulatory provisions and current market conditions are eroding banks’ profitability and pushing them toward losses. When construction contractors face financial difficulties and the government fails to make payments, nearly Rs. 500 billion in bank lending is put at risk, making a rise in NPLs inevitable. Ultimately, this will also have a direct negative impact on government revenue collection,” he said.
Gyawali also called for a distinction between wilful defaulters and genuine borrowers who are unable to repay loans due to circumstances beyond their control.
He argued that borrowers who deliberately default should not be treated the same as those facing financial hardship caused by the economic slowdown or delayed government payments. Under the current legal framework, loans classified as “loss” for one year can trigger measures such as blacklisting borrowers, suspending passports, and initiating asset seizure proceedings, which, he said, have placed additional hardship on genuine businesses already under financial stress.
While stressing that wilful defaulters should face the strictest possible legal action, Gyawali said businesses that have made genuine investments but are struggling because of the economic downturn or delayed government payments should be granted additional time and appropriate relief measures to repay their loans.
People’s News Monitoring Service.
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