Kathmandu: Finance Minister Dr. Prakash Sharan Mahat engaged in a meeting with banking leaders on Sunday to address prevailing challenges within the banking system.

During the gathering, which brought together CEOs from various commercial banks at the Ministry of Finance, Dr. Mahat delved into the reasons behind the limited demand for loans, even in the face of ample liquidity in the market.

In recent days, the finance minister has been actively consulting with representatives from the private sector, donor agencies, regulatory bodies, and other stakeholders. These discussions aim to formulate strategies for implementing economic reforms.

Dr. Mahat posed crucial questions during the meeting: "Why hasn't there been an upsurge in loan demand within banks and financial institutions? How can the banking sector contribute to economic buoyancy? What measures should the government and Nepal Rastra Bank take to rectify the current state?"

Sunil KC, Chairman of the Nepal Banker's Association, shared his perspective, highlighting the erosion of confidence in both the private and banking sectors. He also pointed out that confusion had arisen due to taxation issues related to FPO (Follow-on Public Offering).

Moreover, KC emphasized that funds from local levels should be considered as deposits, underscoring that nearly Rs 150 billion in deposits has diminished since the start of the current fiscal year. He anticipated a continued decrease in interest rates, potentially reaching single-digit figures.

During the deliberations, bankers recommended specific actions. They suggested opening up land for development purposes, relaxing regulations in the real estate market, and simplifying the loan process for small and medium enterprises. These proposals are aimed at fostering economic growth and rejuvenating both the banking and private sectors.