KATHMANDU: Chief executives of Nepal’s commercial banks have urged the government to address legal uncertainty, reform banking regulations and restore investor confidence, warning that policy weaknesses are hampering lending and threatening the government’s 7% economic growth target.

During a meeting with Finance Minister Dr. Swarnim Wagle on Tuesday, CEOs of all 20 commercial banks outlined four key concerns affecting the banking sector and broader economy.

Their top concern was growing legal uncertainty, saying recent arrests and legal action against bank directors have created fear across the sector. Bankers argued they cannot confidently expand lending if routine banking decisions expose them to criminal liability.

They also called for an “Indian model” requiring large borrowers to conduct transactions only through the lending bank, saying it would improve monitoring of loan utilization and reduce fund diversion.

The CEOs further proposed banning cash deposits into third-party bank accounts to curb illegal hundi transactions, arguing that such a move would strengthen formal banking channels and improve financial transparency.

Another key demand was the immediate implementation of a centralized Know Your Customer (KYC) system, saying the current requirement for customers to repeatedly submit the same documents at different banks creates unnecessary delays and costs.

Bankers also expressed concern over rising non-performing loans, urging a review of the rule requiring 100% provisioning and blacklisting of borrowers after one year of default. They warned the provision is discouraging lending and could permanently shut down viable businesses.

The banking industry also called for reforms to SME lending policies, simplification of rules governing non-banking assets, permission to distribute dividends from debenture redemption reserves, faster procurement of major infrastructure projects, and expanded power purchase agreements (PPAs) to stimulate investment and support economic recovery.