Lending to service sector jumps 18% as tourism, hotel businesses rebound

Published On: May 7, 2019 08:49 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, May 7: Bank's lending to service industry has jumped by 18 percent over the first eight months of the current fiscal year 2018/19, reflecting buoyant sentiment among investors on what is called a tertiary sector in the economy. 

According to data released by Nepal Rastra Bank (NRB), loans to service industry were up by 17.9 percent, or Rs 35.36 billion, to Rs 232.51 billion in first eight months of FY2018/19. In the same period of FY2017/18, BFIs outstanding loan to the service industry was Rs 197.15 billion, up by 14 percent compared to the corresponding period of FY2016/17.

Bankers attribute the impressive growth in bank investments to the rebound in service sector, particularly tourism industry, which has grown by 10.89 percent in FY 2018/19. 

While the rise in investments of banks in the service industry follows the overall growth trend in lending, the central bank's policy to encourage banking institutions to channelize more financial resources to key areas, including service sector, has also fuelled the growth.

“You can see a lot of hotels are being constructed, while tourism sector is also buoyant as tourist arrivals are increasing at a record high pace. This will definitely increased the demand for loans from these businesses,” said a banker. 

One of the highest growths of bank lending within the service sector is from hotels sub-sector. The data shows that lending to hotels rose by 21.9 percent, or Rs 14.81 billion, in the review period. The total outstanding loans to hotels sector now stand at Rs 82.4 billion.

Meanwhile, bank's total lending grew by 14.8 percent, or Rs 357.64 billion, to Rs 2,780.42 billion in first eight months of the current fiscal year.

According to the data, banks saw a lending growth of 14.2 percent on tourism sub-sector that includes trekking, mountaineering, resort, rafting and camping, among others, in the first eight months of the current fiscal year. With Rs 2.6 billion loans added on this sub-sector, the total outstanding investment of banking institutions is Rs 20.93 billion. There was an uptick of 8.8 percent, or Rs 275 million, in lending to automotive services to Rs 3.41 billion.

Banks also ramped up lending by 52 percent, or Rs 2.73 billion, to Rs 7.96 billion on entertainment sub-sector including on recreation and films. Similarly, banks have an outstanding loan of Rs 41.66 billion in education sector as of mid-March 2019, up by 12.9 percent from a year ago. Banks lending to the health services that includes hospital and clinics also rose by 7.4 percent, or Rs 2.07 billion, to Rs 30.15 billion.

Other service companies also received a total of Rs 44.35 billion in loans from banking institutions as in the first eight months of FY2018/19, a jump of 22.5 percent from the same period in the last fiscal year. However, lending to advertising business fell by 4.1 percent to Rs 1.65 billion as of mid-March 2019, the data shows.

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