KATHMANDU, Oct 16: Private sector lending by the Banks and Financial Institutions (BFIs) has started to increase after they reduced interest rates by a notable percentage.
The Current Macroeconomic and Financial Situation Report of Nepal unveiled by Nepal Rastra Bank (NRB) on Tuesday shows that the BFIs issued credit worth Rs 73.39 billion to the private sector, a 1.4 percent growth in the first two months of the current fiscal year. The growth in private sector lending in the corresponding period of last FY was Rs 33.60 billion (0.7 percent). On a year-on-year basis, credit to the private sector from BFIs increased 6.6 percent in mid-September 2024.
With the banks witnessing excess liquidity, they reduced their lending rate successively in the past few months. As a result, the base interest rate of the commercial banks has reduced to as low as 6.03 percent for the month of October.
Revised interest rate corridor system introduced
During mid-July and mid-September, private sector credit from commercial banks, development banks and finance companies increased by 1.5 percent, 1.1 percent and three percent, respectively. Out of the total outstanding credit of the BFIs as of mid-September 2024, 13.2 percent is against the collateral of current assets (such as agricultural and non-agricultural products) and 66.2 percent against land and building.
Likewise, the BFIs’ outstanding loan to the agriculture sector increased 0.2 percent, production sector 0.9 percent, construction sector 1.2 percent, wholesale and retail sector 1.2 percent, transportation, communication and public sector 2.2 percent. The total amount of loans to the service industry sector increased by 1.7 percent and those in the consumable sector increased 1.1 percent.
