Bank lending posts double-digit growth

KATHMANDU, Sept 3:

While the banking industry has been grappled with liquidity surplus for the past couple of years, loan flow of bank and financial institutions (BFIs) is posting double-digit growth in recent years.

According to Nepal Rastra Bank (NRB), loans and advances of BFIs jumped by 19.8 percent, or Rs 221.61 billion, in the last Fiscal Year 2014/15. Such growth was 18.7 percent, or Rs 176.14 billion, in 2013/14.

In the review year, private sector credit from commercial banks, development banks and finance companies increased by 22 percent, 16 percent and 0.4 percent, respectively.

"BFIs' credit exposure to production, construction, wholesale and retail trade sectors shows a remarkable growth," reads the macroeconomic situation update report of NRB.

According to the report, credit to production sector increased by Rs 32.89 billion (14.8 percent), compared to a rise of Rs 32.10 billion (16.8 percent) in the previous year. Likewise, credit to construction sector increased by Rs. 33.31 billion (27.9 percent), the wholesale and retail trade sector by Rs 53.23 billion (21.8 percent) and the transportation, communication and public service sector by Rs. 12.75 billion (27 percent) during the review year.

Bankers, however, said that credit to the private sector has not increased significantly as the country is still plagued by political instability. "Many investors are still in wait-and-watch mood for making investment in new businesses and industries. Political uncertainty has stymied the demand for loans from the private sector," a CEO of a commercial bank told Republica. "However, demands and extension of loans on service sector, retailers and construction is in an increasing trend," he added.

Credit flow to construction sector, wholesale and retail trade sector, and transportation, communication and public service sector had increased by Rs 23.49 billion (24.5 percent), Rs. 45.94 billion (23.2 percent) and Rs. 3.45 billion (7.9 percent) respectively in 2013/14. In the review year, credit to agricultural sector increased by Rs 14.25 billion (28 percent) compared to a rise of Rs 11.13 billion (28 percent) in the previous year.

However, credit flow to private sector has declined in last two fiscal years compared to 2012/13 when loan flow to had increased by 20.8 percent (Rs 161.92 billion).

Source: Republica