KATHMANDU, July 30: At a time when the government and the Nepal Rastra Bank (NRB) have been encouraging bank and financial institutions (BFIs) to increase lending in agriculture sector, growth rate of such loans is falling.
BFIs added only Rs 34.4 million in their agro loan portfolio in the first 11 months of 2016/17. Flow of agro loans grew by only 18 percent to Rs 117.47 billion in the first 11 months of the current fiscal year. In the same period last year, flow of agro loans had increased by 23 percent.
Growth of agro loans flow is below the overall lending growth reported by BFIs. Credit to private sector from BFIs increased by 18.8 percent in the review period compared to an increase of 17.8 percent in the same period of the previous fiscal year.
Animals Farming/Service sub-category have received the highest shares of loans in the agriculture sector, according to the NRB. Banks have floated Rs 6.23 billion of loans in this category. Farming/Farming service accounted for Rs 2.4 billion of total loans floated under the agriculture category.
While the growth rate of loans under agriculture sector fell in the review period, sectors like Mines, Productions, Metal Productions, Machinery and Electrical Tools and Fitting, Transportation Equipment Production and Fitting, and Wholesaler and Retailers, among others, observed growth in credit disbursement in the review period.
Credit to industrial production sector increased by 13.8 percent, while loan flow to construction sector grew by 16.7 percent. According to NRB, loan flow to service industries grew by 14.5 percent, wholesale and retail trade sector by 20.6 percent, and transport, communication and public sector 32.3 percent.
Of the total outstanding credit of BFIs, 61.3 percent is against the collateral of land and building and 14 percent against the collateral of current assets (such as agricultural and non-agricultural products). Such ratios were 60.2 percent and 12.3 percent, respectively, in the same period of the previous fiscal year.
Similarly, credit from BFIs to real estate sector amounted to Rs 242.61 billion in mid-June 2016. This is 14.9 percent of total credit exposure of BFIs.
As at mid-June 2016, total margin lending stood at 2.1 percent (Rs 34.19 billion) of BFIs' credit exposure. Similarly, credit to small and medium enterprises was only 2.5 percent (Rs 33.37 billion) of the total loan portfolio.