Currently, banks and financial institutions have been giving directed loans to agriculture, energy, and small and medium sectors as priority sectors. However, the report submitted by the Banking Sector Reform Suggestions Task Force to Nepal Rastra Bank Governor Bishwanath Poudel suggests reviewing the areas of directed loans.

‘It is good to hear about the problems and solutions of directed sector lending, but if it is not properly managed, directed sector lending is relatively risky,’ the report says. ‘The results of decisions made on emotions are not good. Even if the actual demand is low, there is a risk that directed lending will flow more than needed due to fear of penalties, which will increase non-performing loans and harm the economy in the long run.’

The report says that the poor can be made rich only by providing loans not only to them but also by providing knowledge and skills and arranging mentors. The report states that currently, there is more non-performing loans in agricultural and small loans that must be provided compulsorily than other loans. Although agricultural loans have been increasing continuously, the contribution of agriculture to the gross domestic product (GDP) has been continuously decreasing. ‘Since agriculture, which involves almost 60 percent of the population, contributes less than 25 percent to the gross domestic product, further study is needed to determine which sectors will contribute around 60 percent,’ the report says. ‘Although the energy sector has seen low non-performing loans so far, the introduction of the take-and-pay concept due to increasing energy production and the lack of a clear framework to purchase all energy from the Nepal Electricity Authority indicates the future risk of this sector.’ Therefore, the task force suggests that a study should be conducted with the involvement of good individuals/institutions outside the Nepal Rastra Bank to determine which sectors of Nepal are priority sectors and how much credit is needed in those sectors.