KATHMANDU: Nepal Rastra Bank (NRB) is set to introduce market conduct supervision starting the next fiscal year to protect consumers from risks associated with financial products and services. During a Pre-Monetary Policy Discussion organized by the Society of Economic Journalists-Nepal (SEJON), NRB Governor Maha Prasad Adhikari highlighted the need for effective measures to safeguard service seekers from financial service anomalies. He noted that the central bank has primarily relied on regulatory market inspection mechanisms such as onsite and offsite inspections but now aims to adopt a more comprehensive approach.

The new supervision framework will focus on understanding industry developments, tracking market-level risks, and monitoring changing consumer behaviors. It will assess financial institutions' business practices with their clients and internal controls related to market conduct. The move comes amid rising concerns about multiple risks faced by banks and financial institutions (BFIs), including an increase in non-performing assets and malpractices such as high service charges, inadequate 'know your customer' compliance and misreporting of assets.

Governor Adhikari also addressed the reluctance of BFIs to issue loans despite having over Rs 600 billion in loanable funds. He stressed the importance of directed lending to boost internal production and urged BFIs to take on and mitigate risks effectively. Adhikari indicated that the upcoming monetary policy would be data-driven and might not offer much flexibility, given its inherent limitations.

Finance Secretary Madhu Kumar Marasini emphasized the need for increased capital injection to spur the country's development. He mentioned the ongoing collaboration between the Ministry of Finance and NRB to align fiscal and monetary policies to mobilize idle funds in the banking sector. Participants at the discussion called for policies to boost private sector confidence, including the segregation of loans by BFIs, the introduction of new monetary tools, a focus on real sector growth, and improvements in the effectiveness of central bank supervision.