‘Launching an Asset Management Company Alone Won’t Resolve All Banking Sector Issues’

Manoj Gyawali, CEO of Nabil Bank, stated that establishing an asset management company (AMC) will not magically solve all the problems in the banking sector. He acknowledged that while the rise in bad loans to 5.6 percent presents a challenge, this rate is still the second-lowest in the South Asian region. Gyawali emphasized that there is little risk of depositors’ funds being lost or compromised within banks.

Gyawali explained that the mere creation of an Asset Management Company does not mean all banking problems will be instantly resolved. An AMC’s role is to assess the viability of troubled companies, improve their financial management and cash flows, and undertake restructuring and transformation efforts. He noted, “No bank is expecting the AMC to simply buy off all their assets so that they can rest easy, nor can AMCs acquire all such assets.”

He also refuted claims that rising non-performing assets (NPAs) have left banks in a fragile or ruined state. “Although the NPA ratio has increased from about 1.5 or 1.6 percent to 5.6 percent, it remains the second-lowest across South Asia,” he pointed out. Gyawali presented comparative figures showing approximately 10 percent NPAs in Pakistan and Sri Lanka, where the rate exceeds 10 percent, and around 30 percent in Bangladesh.

Further, he clarified that under the Income Tax Act, NPAs up to 5 percent are considered deductible, and the central bank’s circular provides certain benefits within this threshold. Therefore, portraying the 5 percent mark as a major problem is not appropriate. He also highlighted that Nepali banks maintain a 1 percent provisioning even on regular loans, indicating the sector is not in a state of weakness. “At present, the prospect of ordinary depositors losing their funds in banks is very remote,” he stressed.