In the late 1980s and early 1990s, Indian banks operated in an environment defined by heavy regulation, weak credit demand, controlled pricing, and limited strategic freedom. Some resisted the temptation to chase artificial growth or over-adapt to a distorted system. Instead, they chose “strategic hibernation,” quietly preserving core capabilities while waiting for conditions to change. When liberalization arrived, those banks re-emerged stronger. Others, who froze completely or conformed too deeply to the old regime, were absorbed or disappeared.

Nepalese banking today shows uncomfortable parallels. Liquidity is abundant, yet credit demand remains weak. Asset-quality pressures are rising, returns on capital are under strain, and market confidence remains fragile amid political uncertainty. Marginal growth is supported by remittances, while productive investment, exports, and consumption remain subdued.

This may be a moment for strategic hibernation. But strategic hibernation is not stagnation. It is a deliberate choice to slow expansion where risk-adjusted returns do not justify capital deployment, while preserving and strengthening the capabilities that matter most: credit judgment, risk discipline, data quality, talent, customer trust, and balance-sheet resilience.

Crucially, this is also the phase to prepare for the next dividend cycle: digital and AI-led banking.

Banks that use this period to modernize data foundations, clean balance-sheet signals, embed analytics into credit and risk decisions, and build human-AI operating models will be positioned to unlock disproportionate value when confidence and investment return. AI does not reward speed alone; it rewards readiness. The institutions that can deploy AI responsibly, at scale, and with regulatory confidence will widen the gap quickly.

Indian banks that succeeded through hibernation did not wait passively. They stayed close to policy signals, anticipated inflection points, and kept themselves structurally ready to accelerate. The same discipline is required today, only the prize is larger.

The next cycle will not reward those who chased growth for appearances.
It will reward those who conserved capital, sharpened judgment, and prepared quietly for reacceleration.

Nepalese banking now has the chance to apply it this time, with technology on its side.