KATHMANDU, Dec 11: Personal home loans issued by banks and financial institutions (BFIs) increased by nominal amounts amid the slump in real estate transactions after Nepal Rastra Bank (NRB) adopted a policy to facilitate credit flow in this category in the current fiscal year.
Issuing the monetary policy for the current FY, the NRB extended the ceiling for BFIs’ investment on loans for construction and purchase of residential homes from Rs 20 million to Rs 30 million. Likewise, the loan to value ratio for home loans has been maintained up to 80 percent.
According to the records with the NRB, the BFIs issued home loans of Rs 9.29 billion in the first three months of FY 2025/26. The amount was 6.21 percent more compared to the home loans issued in the same period of the last FY. By the end of the FY 2024/25, BFIs had issued home loans of Rs 332 billion, while it rose to Rs 341.35 billion as of mid-October this year.
Revised interest rate corridor system introduced
Of late, BFIs have been unable to utilize their excessive liquidity due to the ongoing economic slowdown, particularly the slump in the real estate business. While they are reported to have an overwhelming liquidity amount of Rs 1.1 trillion, the base interest rate has come down to as low as four percent per annum. According to bankers, credit flow has increased due to the low cost of borrowing at present rather than the revival of the economy.
In the past one year, the BFIs invested Rs 21.77 billion in home loans, according to the central bank. As of mid-October last year, the investment under the heading stood at Rs 319.58 billion.
Among individual commercial banks, NIC Asia Bank with its personal home loans of Rs 44.48 billion stood at the topmost position in the portfolio. The bank however witnessed a decline of 20.62 percent in its personal home loans issued between mid-July and mid-October.
Global IME Bank has issued personal home loans of Rs 43.95 billion. The state-owned Rastriya Banijya Bank has provided its clients with loans of Rs 31.20 billion under this heading.
