Asian-Pacific Association of Banking Institutes (APABI)

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Featuring eight of the world’s 10 tallest mountains and an abundance of unforgettable views, Nepal is one of the most tourism-dependent member countries of APABI. The industry accounts for 11% of its employment, and international tourism makes up almost 30% of its exports. Therefore, its economy was bound to be deeply affected by the shutdown of international travel, as well as domestic lockdowns. Its GDP growth fell from 6.7% in 2019 to -1.9% in 2020.

Mr. Dhan Thapa,
Assistant General Manager,
 National Banking Institute (NBI)

Nepal is strongly affected by its much larger Southern lowland neighbor of India. As one measure of this dependence, 30% of its GDP comes from remittances, most of which is from India. When the pandemic situation in India broke earlier this year, after having been well contained during 2020, cases were bound to spill over across the border. Thus, as APABI spoke to Dhan Thapa of the National Banking Institute (NBI) in July, the nation was just coming out of lockdown.

Like many other APABI members, NBI is adapting to a new COVID and post-COVID world with a renewed emphasis on digitalization, both in its curricula and in its working model. Dhan expects a mix of physical and virtual work in the future. Over the past year, following a wait-and-see period of uncertainty, NBI has increased its focus on self-paced online coursework on virtual platforms. These include both self-developed courses and outsourced certification courses from Moody’s.

Regulators are expecting and encouraging major changes in the banking market. Nepal’s banking system is organized into four classes. It currently has 47 Class A financial institutions (commercial banks), 18 Class B FIs (development banks), over 20 Class C FIs (financing companies), and over 70 Class D FIs (microfinance institutions). Dhan expects the number of Class A institutions to be halved in the wake of the current crisis.

The pandemic has underscored the role of touchless payments in the Nepal’s transition into a post-COVID economy. Last year, banks were told to cut down on in-person visits, sparking (unfounded) fears that customers would lose access to their money. The government did mandate that banks reduce their in-person staffing levels by 80%, but these fears were unfounded. Savers had full access to their funds. Meanwhile, banking personnel have priority to receive vaccination.

The current situation has prompted development of digital payments. One measure the central bank introduced in response to the situation is prepaid dollar cards. A large portion of locally consumed goods and services are imported. Meanwhile, foreign trade is a frequent source of inconvenience; the central bank frequently imposes restriction on imports of foreign goods due to foreign exchange imbalances. One positive result of the pandemic may therefore be streamlined processes from the consumer perspective.