Centralized credit decision-making, operational efficiency, and credit risk: Evidence from Agricultural Development Bank Limited (ADBL), Nepal

Abstract

This paper examines policy-associated changes in operational efficiency and credit risk following a credit-centralization reform at Agricultural Development Bank Limited (ADBL), a Nepali public-sector bank. Effective 17 September 2024, ADBL extended centralized approval to standard loans across size categories. Using loan-level administrative records covering July 2020 to November 2025, the study applies a fixed-effects relative-change framework comparing more-exposed small loans with less-exposed large loans. Large loans also experienced further centralization, so the comparison group is not untreated. Mean approval time declined from 77.3 to 33.1 days for large loans and from 27.9 to 25.8 days for small loans. Adjusted estimates indicate that small loans experienced a 17.7-day smaller relative reduction in approval time, while the relative change in disbursement time was statistically insignificant. Binary NPL and WatchList indicators declined descriptively in both groups, but the relative declines were smaller for small loans and weakened under common-seasoning checks, particularly for NPL status. Parallel pre-trends are supported for approval time, NPL status, and WatchList status but not for disbursement time. The findings are therefore interpreted as institution-specific policy associations rather than causal effects and support differentiated rather than blanket centralization of credit approval.