WHEN INSTITUTIONS fray, language tends to follow. “Some advice” should suffice. But Nepal’s central bank, like its economy, is currently grappling with more than syntactic slip-ups. So with apologies to grammar purists and gratitude for blunt truths, here is some advice for Biswo Poudel—newly installed as governor of the Nepal Rastra Bank—on what to avoid.
He arrives amid turbulence rather than triumph. Economic growth is sputtering; confidence is fragile; and the country’s financial plumbing is alarmingly leaky. Households are squeezed by debt and distrust. Cooperatives are collapsing. Bank balance sheets are swollen with rotten loans. Yet the NRB’s response has been to tinker instead of transform.
Nepal needs more than a ceremonial governor. It needs a central banker with backbone.
Ignore bad loans at your peril
In the post-COVID haze, banks embarked on a lending spree worthy of a drunken sailor. Fuelled by low rates and laxer underwriting, credit surged into speculative shares and politically connected businesses. That short-term sugar high is giving way to a stubborn hangover. Non-performing loans are climbing, even by the cautious accounting of the banks themselves. The true figure—concealed by cosmetic restructuring and evergreening—is likely worse.
This is more than a banking headache. It is a macroeconomic time bomb. Frail bank balance sheets curb credit to the sectors Nepal claims to champion: small manufacturers, women-led businesses, rural enterprises. These are the real economy.
Stronger supervision might have softened the blow. After its 1997 crisis, South Korea compelled banks to recapitalise and lift provisioning standards, swiftly and publicly. Nepal, by contrast, has chosen to paste over cracks. The NRB must break that habit. A public stress test of banks, carried out with independent oversight, would be a start.
Don’t let the cooperative mess fester
For years, cooperatives supplied a democratic alternative to formal finance. In the absence of serious oversight, they drifted into murkier territory: high-yield savings schemes, opaque investment vehicles, and in some cases fronts for political patronage and money laundering.
The Department of Cooperatives, a relic of bureaucratic compartmentalisation, lacks the expertise and authority to rein in the chaos. Meanwhile the NRB has treated it as someone else’s problem. That position is untenable.
The fallout is stark. Elderly savers have lost pensions. Migrant workers’ families have seen nest eggs vanish. The damage is financial and psychological. Once trust drains from the financial system, rebuilding it can take generations.
Poudel must press for a consolidated financial regulatory architecture. If the NRB cannot command the cooperative sector, it must at least craft a way to track systemic spillovers. Regulatory ambiguity is negligence.
Speak plainly—or stay silent
The NRB’s monetary pronouncements read like a graduate economics thesis fused with a bureaucratic memo: heavy on equations, thin on plain speech. This is unwise. A central bank’s greatest asset is credibility—and that is built through action and explanation.
The U.S. Federal Reserve, under Ben Bernanke, embraced transparency during the post-2008 recovery: press briefings, plain-language explanations, even blog posts. The NRB continues to issue PDFs dense with jargon, unintelligible to many outside Kathmandu’s policy salons.
This should change. Policy communication ought to be trilingual: English for investors, Nepali for the public, visual for everyone. Summarise monetary policy with infographics. Use community radio. Hold regional roadshows. If an interest-rate rise alters a family’s ability to buy fertiliser in Rolpa, the least the NRB can do is explain why.
Avoid the circus
Some governors have sought the limelight. They appear on primetime panels, toss out pithy soundbites and spar with YouTubers posing as pundits. That may win applause. It also chips away at institutional gravity.
The NRB is no talk show. It exists to steward stability. It should project the authority of a referee, not the swagger of a striker. For inspiration, Poudel could look to Raghuram Rajan, India’s former central banker: candid yet measured, public yet restrained.
Don’t regulate by ambush
The NRB has at times lurched into overreach. Sudden lending caps, abrupt capital outflow restrictions and inconsistent directives have grown common. However well meant, such ad hoc moves breed confusion and chill investment.
Sound regulation is anticipatory, consultative and consistent. That entails stress-testing scenarios, gathering feedback from bank executives, fintech start-ups, cooperative heads and migrant households, then acting with speed and care.
The private sector already contends with erratic tax policy, electricity shortfalls and fickle politics. The central bank should serve as an anchor, rather than another swell.
Remember who is listening
A 0.5% rise in the policy rate may appear trivial in a committee room. In a village in Achham, it could mean a microloan slips out of reach or a daughter’s college plans are shelved. Monetary policy carries consequences for households.
Too many NRB policies rest on trickle-down reasoning that fails in practice. Informal borrowers, seasonal farmers and remittance-dependent households read different signals from traders in Putalisadak. Good central banking means building feedback loops, not merely issuing top-down signals.
Before each decision, Poudel should ask: could this be explained in a ward office in Bhojpur without losing sense or dignity? If the answer is negative, pause.
Don’t just manage—reform
The central counsel is to think past upkeep. Nepal has had governors who kept the lights on. That suffices no more. The system needs a reboot.
Poudel has academic pedigree. What he needs is political courage: codifying the NRB’s independence, digitising operations, overhauling recruitment—hiring people able to perform—and shielding monetary policy from short-term political cycles. It also entails fostering an institutional culture that prizes dissent, empiricism and integrity.
He should leave behind a central bank that is respected and understood: a place where citizens grasp what it does, why it matters and how to hold it to account.
The last rate cut
Nepal’s financial future hinges less on any single policy move than on institutions that command public trust. The Rastra Bank stands among the few technocratic bodies retaining a sliver of credibility. That is blessing and burden alike.
Governor Poudel, heed this: central banking concerns more than rates and reserves. It concerns narrative. And the country is crying out for a better one. ■
