Nepal, Feb. 6 -- As banks cautiously return to lending to contain bad debts, their preference for short-term, low-risk loans is stabilising the financial system but slowing credit to productive sectors needed for sustained economic growth.

Banks and financial institutions (BFIs) are lending again, but with extreme caution. In the first half of the year, lending to the private sector rose by 3.4 percent, or about Rs 187.66 billion, bringing total outstanding loans to Rs 5.695 trillion. By mid-January, lending had increased by 6.33 percent compared to the same period last year. Activity is picking up, but banks remain wary. They are largely prioritising short-term, low-risk loans as they continue to grapple with bad debts. Data from the ce...