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The talks of forming an asset management company, or bad bank, has gained ground after the government announced its plans to establish an Asset Management Company (AMC) in the budget for the upcoming fiscal year to manage bad loans and non-banking assets held by banks and financial institutions. 

Presenting the budget for fiscal year 2025/26, Finance Minister Bishnu Prasad Paudel said, “an asset management company will be established to manage bad loans and non-banking assets of banks and financial institutions.” The plan also featured in the government’s policy and programs for 2025/2026.

The High-Level Economic Reform Advisory Commission, led by former Finance Secretary Rameshore Khanal, had also advised the government to form an AMC in light of deteriorating credit recovery rates and an alarming increase in distressed assets across the banking sector.

The concept of AMC started in the 1980s when the US government established the Resolution Trust Corporation (RTC) in 1989 at the height of the savings and loan crisis. Globally, bad banks gained prominence during the 2008 financial crisis. For instance, Ireland established the National Asset Management Agency (NAMA) in 2009, and Spain followed with SAREB in 2012 to resolve toxic assets in their financial systems.

In South Asia, India launched its own bad bank, the National Asset Reconstruction Company Limited (NARCL), in 2021 to help its banks recover from large-scale NPAs. Nepal’s planned AMC is expected to function along similar lines—isolating bad loans and toxic assets from the books of financial institutions so that banks can refocus on lending and core banking activities.

The concept of establishing an asset management company was proposed as early as 2001. At that time, a task force was formed, including former banker Parshu Kunwar Kshetry, Rajan Singh Bhandari, and former executive director of Nepal Rastra Bank, Bhismaraj Dhungana, to conduct a study.

No further action or decision was taken for 25 years. However, as non-performing assets in the banking system increased, the central bank unveiled a plan to open a bad bank through the monetary policy for the current fiscal year, where then-Governor Maha Prasad Adhikari said the central bank would initiate the process for setting up such a company.  In line with this, central bank officials have begun drafting a legal framework for the institution.

The price of gold has increased by Rs 2, 900 per tola in the domestic market on Tuesday.

According to the Federation of Nepal Gold and Silver Dealers’ Association, the precious yellow metal is being traded at Rs 192, 700 per tola today. It was traded at Rs 189, 800 per tola on Monday.

Similarly, the price of silver has increased by Rs 55 and is being traded at Rs 2, 045 per tola today.

The Nepal Stock Exchange (NEPSE) gained 2. 77 points to close at 2,695. 84 points on Monday.

Similarly, the sensitive index surged by 0. 18 points to close at 461. 39 points.

A total of 22,031,861-unit shares of 314 companies were traded for Rs 9. 22 billion.

Meanwhile, Om Megashree Pharmaceuticals Limited (OMPL) and Pure Energy Limited (PURE)​​​​​​​ were the top gaines today, with their price surging by 10. 00 percent.

Likewise, Bhugol Energy Development Company Limited (BEDC) was the top loser as its price fell by 6. 45 percent.

The new fiscal budget presented on Thursday has effectively halted the progress of around 17,117 MW of run-of-river (RoR) hydropower projects in Nepal by introducing a major policy shift in the Power Purchase Agreement (PPA) model.

Until now, RoR projects operated under a ‘Take or Pay’ PPA model, where the Nepal Electricity Authority (NEA) had to pay private developers regardless of whether it used the electricity or not. The latest budget, however, proposes a shift to a ‘Take and Pay’ model, meaning the NEA will only pay for the electricity it actually purchases.

Ganesh Karki, President of the Independent Power Producers’ Association of Nepal (IPPAN), warned that this policy change could render investments already made by private developers in RoR projects unviable. He said banks are unlikely to finance projects under the new PPA model, pushing many developments to the brink of cancellation.

According to IPPAN, 17,117 MW worth of RoR projects currently hold licenses from the Department of Electricity Development, with approximately Rs 66bn already invested. These projects are in various stages of development, awaiting PPAs and financial closure. Once fully implemented, total investment could reach Rs 3.4trn. The breakdown includes 2,078 MW of projects already under construction, 6,436 MW awaiting construction permits, 5,079 MW with survey licenses, and 3,521 MW awaiting survey permits.

This shift has frustrated private developers who had expected the budget to align with the government’s recently unveiled Energy Development Roadmap, which aims to generate 28,500 MW of electricity—15,000 MW for export to India and 13,500 MW for domestic consumption.

IPPAN claims the new provision makes it nearly impossible for the private sector to move forward, despite other budget promises like streamlining forest clearance, transmission line construction, and support for reservoir-based projects. Karki argued that unless developers can build the projects, these other incentives become meaningless.

“The government’s move has placed private developers in a position where their investment could drop to zero,” Karki said. “The state should not have issued licenses in the first place if it planned to later change the agreement terms. The Department of Electricity Development continues to issue licenses, but developers are now left in limbo.”

NEA sources said the switch to ‘Take and Pay’ is necessary for the financial sustainability of the authority. The previous model, where payments had to be made even without actual power usage, posed significant financial risks—especially during the monsoon when RoR production exceeds domestic demand and guaranteed exports to India remain uncertain.

IPPAN has strongly opposed the shift and announced plans to launch protests if the decision is not reversed. In a statement released Friday, IPPAN described the new policy as hostile to private investment and a setback for Nepal’s power sector. The group also criticized the government for failing to support the ongoing development of RoR projects, which they claim still constitute a majority of the private sector’s hydropower activity.

IPPAN called for an immediate revision of the policy and demanded a return to the ‘Take or Pay’ model. Failure to do so, they said, would prompt a “strong and decisive” protest campaign.

Currently, Nepal’s total electricity generation capacity is about 3,600 MW, with over 80 percent contributed by the private sector. Of the 17,117 MW of RoR projects awaiting PPAs, the NEA or the government is developing only 190 MW.

IPPAN argues that the new provision contradicts the Energy Development Roadmap and the goals set out in the 16th Five-Year Plan of the National Planning Commission. The association also claims the decision violates existing policies and legislation, including the Electricity Act 1992, the Hydropower Policy 2001, and the National Water Resources Policy.

The organization fears that this policy change will derail over Rs 1.5trn already invested by the private sector, and jeopardize an additional Rs 3trn planned for future investment, pushing the entire sector into uncertainty.