Banking and Finance

Sector
Overview

The Banking and Financial Institutions (BFI) sector has played a key role in increasing the growth of Nepal’s services sector. The BFI sector has rapidly expanded due to the gradual liberalization policies since the mid-1980s, continuing during the 1990s and thereafter in the financial sector as well as inflow of remittances. There are 28 commercial banks with 7 being joint venture banks which shows the trust among foreign investors on Nepal’s institutional and policy framework. There are also 36 development banks, 25 finance companies and 63 micro-credit institutions. BFIs are licensed and regulated by Nepal Rastra Bank, the central bank of Nepal. The current government has put a heavy emphasis on achieving double-digit growth which will need increased investments in large infrastructure and energy projects. However, the domestic BFI sector is limited to medium and small projects and not in a position to marshal the financial resources required to develop the infrastructure sector. Moreover, the Banks and Financial Institutions Act (BAFIA), 2017 has provisioned for and encouraged establishment of Infrastructure Development Banks (IDB) that have minimum paid up capital of 20 billion rupees and foreign ownership of up to 85%. This presents a massive opportunity for the investors in the BFI sector who can use their technical expertise and know-how to tap the Nepali financial market. Furthermore, increasing disposable income of people, high saving and investment gap in the country, low insurance penetration rate and the need to catch up with respect to access to modern financial system provides a lucrative base for investment in the BFI sector.

Sectoral
Opportunities

Banks
Insurance Companies