Challenges of Banking Sectors due to

the Covid-19
1. Due to economic slowdown, quantitative & qualitative growth
of banking and financial transactions are in the phase of
declining;
2. Interest income of the bank will be declined by 2% as
provided by the monetary policy;
3. A high degree of risk of bad loans from the business such as
tourism, luxurious industries due to problem in debt
collection;
4. There will be the problem of excess liquidity due to the
contraction of a bank loan;
5. High technical and sanitary operating cost of increasing
digital business or transactions to maintain physical
business;
6. Risk of unauthorized transactions while conducting financial
transaction from the home;
7. Since most of the operating expenses of the banks are of
fixed nature, even if the banking business is reduced,
operating expenses will be increased and that effect on the
net profit of the bank; 8. Risk of rapid spread of covid-19, if
somehow one active employee gets the infection of such
dieses;

Solution for such challenges

1. Merger between commercial bank should be promoted in

order to reduce operating cost and increase the quality of the
bank;
2. Nepal Rastra Bank has to make necessary arrangement for
restructuring and rescheduling of loans by extending the
 grace period for the recovery of loans affected from the covid
-19;
3. If the interest rate on institutional term deposit is significantly
reduced and the interest rate in individual term deposit is
kept slightly higher than inflation, the overall interest rate on
loans will also be lower;
4. To extending loan invested by the banks to facilitate the
business operation of the industries for some time to come;
5. By extending loans to the productive sectors by taking loans
at cheap rate from various international bodies, which will
improve the balance of payments situation in the overall
economy and compensate for the declining income of the
bank from declining remittance and other non-cash
transactions;
6. If some concessions are given in the minimum liquidity ratio
to be maintained by the banks, the banks can increase
extensively.
This pandemic has brought the golden opportunities for the banks
to move towards self-reliance by extending credit to agriculture
and other micro- enterprises. If these challenges can be turned
into opportunity, not only banking sectors but overall economy will
be strengthened.