A growing volume of non-performing loans linked to NRB-mandated priority sector lending — particularly in agriculture and micro, small, and medium enterprises — has emerged as a notable concern this week. The central bank requires commercial banks to direct at least 35% of their loan portfolio to specified priority sectors, a policy that critics say has contributed to rising bad debt.
In response, the NRB has expanded the definition of eligible priority sectors to now include tourism, information technology-based businesses, and export-oriented enterprises that use domestic raw materials, while keeping the 35% minimum allocation requirement in place.
Commercial bankers have publicly urged the NRB to relax and modernize the rules governing the classification of bad loans and non-banking assets, arguing that more flexible classification standards would help stimulate business activity and reduce the burden on financial institutions.