Lending to service sector jumps by 23 percent

Published On: August 31, 2017 02:35 AM NPT

Credit flow to hospitality business on the rise as tourism industry recovers

KATHMANDU, Aug 30: Credit flow of bank and financial institutions (BFIs) to service industries by 23.3 percent in the last Fiscal Year 2016/17 as tourism and hospitality businesses showed signs of recovery. 

According to data compiled by the Nepal Rastra Bank (NRB), banks floated new loans worth Rs 29.55 billion to service sector in the review year compared to Rs 18.58 billion sanctioned in FY 2015/16. The total outstanding loans to the service sector stood at Rs 156.12 billion by the end of 2016/17, according to the central bank.

The BFIs' lending to tourism business, which includes trekking, mountaineering, resort and rafting, went up by 5.2 percent to a total of Rs 12.08 billion in the review period. Similarly, lending to hotel business jumped up by 27.6 percent, or Rs 11.02 billion, in the last fiscal year to Rs 50.93 billion. Advertising sector received total lending of Rs 1.48 billion in the review year, up by Rs 461 million, or 45 percent. 

While loans to automotive services grew by 48.4 percent to Rs 2.93 billion, BFIs disbursed credit of a total of Rs 23.91 billion to the health services. Loan flow to health services grew by 13.8 percent.
The central bank data shows that lending to educational services sub-sector also rose 9.9 percent to Rs 29.81 billion in the last fiscal year. BFIs added Rs 476.3 million in new loans to entertainment sub-sector like recreation and films in the last fiscal year, taking total loans to sub-sector to a total of Rs 3.52 billion. Similarly, loans to 'other service companies' also went up by Rs 10.47 billion the last fiscal year to Rs 31.46 billion. 

Bankers attribute the rising loan exposure to the service sector, particularly hotels and tourism businesses, to expansion in tourism activities in recent months. “Many existing hotels are on an expansion spree, more than a dozen new hotels are either under construction or coming into operation soon,” said a banker. “The rise in tourist footfalls in the last fiscal year and recovery in the hospitality industry in the aftermath of 2015 earthquakes, and end of political turmoil has made the service industry bullish.”

This is one of the highest growths in terms of sector-wise lending of the BFIs. According to the NRB, credit  to  agriculture  sector  increased  by 14.3  percent,  industrial  production  sector  rose by 11.4 percent, and construction sector jumped up by 16 percent. Similarly, loan flow to wholesale and retail trade sector (16.1 percent), service sector industries (23.3 percent) and transport, communication and public sector (25.2 percent) also posted healthy growths in the review year.

Leave A Comment