KATHMANDU, March 17: The contribution of credit flow from the banks and financial institutions (BFIs) to the economic growth of the country has not been spectacular though its volume is equivalent to the gross domestic product (GDP).

At the 'RBBL Management Conference 2024' held in the capital on Saturday, speakers noted that the credit flow from the BFIs should go to the productive sector in a way to contribute to economic growth.

Revenue Secretary Dr Ram Prasad Ghimire said the country was facing big challenges of increasing production and productivity and creating employment. According to him, economic development could not take place as per the target due to low spending of capital expenditure.

Secretary Ghimire said although revenue collection was satisfactory compared to the country's GDP, more resources were needed to realize Nepal's higher development needs.

He also underlined the need to transform the existing trade-based economy into a production-based economy. He stressed the need for the government to create an environment of trust for the private sector so that Nepal's domestic production would increase and become competitive.

Also speaking on the occasion, Nepal Rastra Bank (NRB) Director Dr Prakash Kumar Shrestha said it was difficult to understand government finances after the country adopted the federal structure.

A huge sum of money has been dumped in the government funds, he said, adding it has contributed to bring contraction in the market demand. He expressed concern over increasing negativity towards BFIs in recent times.

Shrestha claimed that the problem in the cooperative sector has affected the BFIs as well.

He went on to say that the private sector has not become optimistic despite gradual improvements, including positive liquidity situation, good foreign exchange reserves and lowering interest rates.

The economy has not witnessed the anticipated reforms due to the shrinking internal demand, shortage of workforce and fall in productivity, he added.

Former president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Bhawani Rana emphasized on increasing investment in agriculture, tourism, herbs and hydropower sectors, calling for the government to bring a private sector friendly policy environment.

Rana urged the government to hold adequate discussions with the private sector in determining the plans in the next fiscal year's budget.

Ex-banker Parshuram Kunwar said the growing competition has helped the banking sector in nurturing professionalism. He pointed out the need for thinking more about enhancing the quality of service to the customers.

Kunwar said good practices at home and abroad should be adopted in addressing the challenges surfaced in the banking sector. He recommended the BFIs adopt information technology and expand investment in the field of innovation.

Fin-tech expert Sanjeeb Subba said cyber security challenges are increasing in the banking sector so investment should be mulled to avert such issues.

He pointed out the need for developing infrastructure for information technology in public service delivery.

According to the organizer Rastriya Banijya Bank, the conference was organized to discuss the challenges facing the national economy and the banking sector among economists, banking experts and entrepreneurs and guide for sustainable banking development in the coming days.

 
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