KATHMANDU, Feb 16: Nepali commercial banks increased their lending by a nominal ratio in the first seven months of the current fiscal year. However, they are still facing a notable challenge in managing their overwhelming amount of loanable funds.
The records with Nepal Rastra Bank (NRB) show that the commercial banks increased their lending by 5.62 percent, compared to a growth of 4.21 percent in their deposit collection during mid-July 2024 and mid-February 2025.
In the review period, the deposit collection surged to Rs 5.997 trillion from Rs 5.754 trillion, while the lending amount increased to Rs 4.827 trillion from Rs 4.570 trillion. As compared to an increase of Rs 242 billion in deposit collection, the loan amounts increased by Rs 256 billion.
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Out of 20 commercial banks, seven were successful in raising their lending by significant amounts. Everest Bank increased its lending by 18.40 percent (Rs 34 billion) to Rs 220 billion, the largest of all. Global IME Bank recorded an increase of 10.38 percent (Rs 40 billion), and Machhapuchchhre Bank had an increase of 9.59 percent (Rs 12 billion) in their loan portfolios. Laxmi Sunrise Bank, Citizens Bank, Siddhartha Bank, and Himalayan Bank were in a row to achieve notable growth in their loan portfolio.
With the marginal increase in their lending, the average credit-deposit (CD) ratio increased to 79.35 percent, against the ceiling of 90 percent maintained by the NRB. On an individual basis, the CD ratio of Himalayan Bank dropped to as low as 63 percent, while Prime Commercial Bank has its CD ratio as high as 85.77 percent.
Nepal's banking sector is grappling with several challenges. Apart from facing surging liquidity problems, they have been gripped by rising cases of defaults, increasing non-banking assets, and stagnated lending. According to the NRB, the BFIs’ non-banking assets reached Rs 40.75 billion, an increase of Rs 17.04 billion in the past year.
With the persisting liquidity problem, the banks have reduced their weighted lending interest rate to as low as 8.69 percent. As compared to a year ago, the interest rate fell by 2.69 percentage points.
Likewise, the base interest rate of banks has also declined to as low as 6.65 percent. According to a banker, banks have been charging only up to an additional 1.5 percent in premiums, citing the low demand for loans. Previously, the banks used to take up to a five percent premium on top of the base interest rate.
After banks failed to improve their loan portfolio, the NRB on Sunday absorbed Rs 40 billion from the country’s banking system. In the first six months of the current fiscal year, the central bank mopped up a total of excess liquidity worth Rs 14.1 trillion from the banks.
