KATHMANDU, Oct 16: Banks and financial institutions (BFIs) struggled to increase their lending in the first two months of the current fiscal year (FY) amid the ongoing economic slowdown and political turmoil.
The latest report of Nepal Rastra Bank (NRB) shows that the BFIs had their credit flow increase by only 0.6 percent during mid-July and mid-September this year. Compared to their total loan portfolio of Rs 5.592 trillion at the end of the last fiscal year, the BFIs extended additional loans worth Rs 35.48 billion during the review period.
For the past few years, BFIs have been facing an excessive surplus of liquidity due to the slowdown in credit flow, which has been worsening in recent times. Although the BFIs have reduced interest rates to a very low level, they have failed to create a notable demand for credit.
Lending slows as banks focus on recovery of loans at fiscal yea...
While Nepal Rastra Bank (NRB) has been struggling to manage liquidity in the banking system, the BFIs have continued to park trillions of rupees with the central bank, earning only minimal interest returns.
In the first two months, the BFIs witnessed a decline in credit flow in four sectors. They were personal overdraft, real estate, deprived sector and bill purchase loans.
During this period, personal overdraft loans decreased 3.6 percent and real estate loans decreased 1.6 percent. Likewise, deprived sector lending went down by 5.9 percent and bill purchase loans by 4.4 percent.
On the other hand, the import loans increased 6.7 percent in two months and stood at Rs 8.44 billion. Similarly, loans against shares increased 3.5 percent (Rs 4.9 billion) and personal home loans up to Rs 20 million went up 2.3 percent (Rs 9.79 billion).
With the increase in margin loans, the BFIs lending against shares has reached Rs 145.60 billion in total.
Likewise, cash flow loans increased 1.7 percent (Rs 11.12 billion) in the review period and term loans increased 1.1 percent (Rs 23.22 billion). The growth rate of loans in other sectors was recorded less than one percent.
Meanwhile, the deposit collection by the BFIs increased 0.5 percent during mid-July and mid-September. According to the NRB, the BFIs’ deposit collection increased by Rs 32.68 billion to reach a total of Rs 7.296 trillion in total deposits.
