Kathmandu. After the ‘Genji Movement’ of September 24, along with the political instability in the country, serious pressure on the economy and banking system has started increasing.
The arson and vandalism during the agitation has not only affected the investment climate but also the financial flows. The closure of the five-star hotel Hyatt Regency for an indefinite period and the halt of the Chandragiri cable car for some time is a sign of that crisis. This has further slowed down economic activity in the country.
The banking sector is now caught between “expectation and reality”. Interest rates are falling and demand for loans has fallen. It’s not good. In fact, the demand for loans should increase as interest rates fall. However, bankers say that the demand has not increased now.
Although deposits have increased in banks due to weak investor morale, it has not been productively utilized. Banks have started choosing safe zones, while credit to production and industry has come to a standstill. This has weakened economic growth by reducing the flow of money into the market.
The stock market is also a victim of this psychological crisis. Analysts say that this has not only shaken the confidence of investors but also the morale of the banking sector. The fall of the stock market is a real sign of the economy. This shows that banks’ risk-taking capacity is diminishing and confidence in the market is eroding.
Investors’ confidence has been further weakened by the government’s decision to cut the power lines of industries amid the dispute over dedicated and trunk-line electricity tariffs. With the government not taking initiatives to restore business environment, banks have also reached a cautious ‘wait and see’ situation. Neither new investment has increased, nor has the recovery of old loans improved.
Political instability and policy uncertainty have made the banking system “liquid”. Although there is a lot of deposits in the banks, the credit flow is weak. This has slowed down the circulation of the economy. Declining foreign investment, declining domestic consumption and increasing operating costs of industries have further increased banking risks.
According to economic experts, the government’s first priority should be to restore trust and stability. They warn that if there is no stability in both the market and the banks, investment will decrease, employment will decrease and the consumption capacity of the citizens will be weakened.
Overall, the post-Genji movement environment has shaken the confidence of the banking system. The flow of money in the market, weak investor morale and the government’s policy directionlessness have slowed down the economy. Experts are of the view that the banking sector will be revived and revived if the government can bring stability, security and investment-friendly policies without delay.
