BFIs float Rs 89 billion loans to agriculture sector

Published On: August 9, 2017 08:56 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Aug 8: Lending of bank and financial institutions (BFIs) to the agriculture sector has gone up by 12.6 percent in the eleven months of the last fiscal year 2016/17. With the loans and advances growing up by Rs 9.94 billion on agriculture sector, the total outstanding credit of the BFIs stood at Rs 88.73 billion. The growth rate of lending, however, is lower than the credit growth of the BFIs in this sector of the corresponding period of the previous fiscal year 2015/16.

BFIs lending to the agriculture sector had gone up 18 percent, or by Rs 11.74 billion, in the same period of the previous fiscal year, according to the data of Nepal Rastra Bank (NRB). 

Experts say that the fall in the growth of agriculture loans despite surge in overall lending indicates the reluctance of the BFIs to finance a principal economic activity of the country. 

Lending toward farming and farming service category of the agriculture sector went up 12.3 percent, or 1.27 billion, in the review period. The total exposure of the BFIs is now Rs 11.62 billion in this category. 

Credit growth toward tea category plunged toward negative, implying that BFIs did not extend loans to this sector at all. The outstanding loans under this category fell to Rs 2.81 billion in mid-June in the last fiscal year from Rs 2.7 billion. 

Animal farming category received a financing of a total of Rs 31.9 billion as of mid-June 2017, a jump by 10.9 percent compared to the loan in the same period of the previous year. 

Credit to forest, fish farming and slaughter category also fell by negative 13.1 percent to Rs 477.8 million, according to the NRB. 

There was a growth of 18.7 percent of loans of BFIs on other agriculture sectors in the 11 months of the last fiscal year, taking the total credit figure of the BFIs on this category to Rs 2.62 billion. 

As the BFIs are reluctant to lend the agriculture sector, the central bank has been increasing the mandatory lending ratio for them to the agriculture sector as part of its directed sector lending policy. Through the monetary policy of the current fiscal year 2017/18, the NRB has raised the productive sector lending requirement for commercial banks to 20 percent from 15 percent. 

Of 20 percent total productive sector lending requirement, a bank must float 10 percentage point of its total lending on agriculture sector.

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