The IMF Country Reports Series covers economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with officials of the country, is published at the option of the member.
The rapid growth of the financial system presents a number of challenges to maintaining financial stability in Nepal. There has been a rapid growth of the banking sector over the last few years. State-owned institutions continue to dominate the banking system. Equity market capitalization has increased sharply while government debt markets remain underdeveloped. Despite a challenging macroeconomic environment, the financial performance of the banking system has improved. The rapid increase in credit growth in recent years suggests growing credit risk.