Access to formal banking channels soars
KATHMANDU, JUL 09 -
A proliferation of banks and financial institutions (BFIs) in the last few years may have posed a risk to financial stability, but it has done wonders to expanding the Nepali people’s access to formal banking channels.
According to the Economic Survey 2010-11, if there was one bank branch for every 29,300 people in the last fiscal year 2009-10, there was one for every 23,800 people as of mid-April 2011.
The figure is based on a comparison between the number of bank branches and the population. With the addition of 249 bank branches during the first eight months of the current fiscal year, their number has reached 1,215 as mid-April this year.
Despite a liquidity crunch in the banking sector, banks continued a massive expansion drive surpassing the addition of branches in all of the last fiscal year within eight months of the current fiscal year. A total of 214 branches were added in the last fiscal, according to the Economic Survey.
If the branches of A, B and C class BFIs are combined, the people’s access to banking channels is found to have further improved. One branch served 17,800 persons as of the last fiscal year.
The Economic Survey’s figure largely resembles the finding of the World Bank study on financial access in 2010 which shows that there were 4.19 bank branches for every 100,000 adult Nepalis. The report for 2009 showed that there were 3.2 branches for the same number of people.
However, Nepal lags behind other South Asian countries except Afghanistan, according to the World Bank report. The relatively improved figure shown in the World Bank report is due to the inclusion of micro-finance institutions as institutions providing financial access.
Former Nepal Rastra Bank governor Dipendra Bahadur Kshetry said the increased banking access was the result of the central bank’s policy to increase the outreach of banks as far as possible.
“NRB has offered incentives through its monetary policy to BFIs to enter rural areas, and they have been exploring previously untapped markets,” he said.
According to the household budget survey 2008 carried out by NRB, 59.6 percent of Nepali households had outstanding loans with institutions and 67.3 percent had outstanding loans with non-institutions suggesting that more people are still dependent on informal channels for credit.
However, the explosive increase in banking outreach has not resulted in a proportionate growth in deposits. The monetary policy’s target was to increase deposit growth by 15 percent, but the achievement was 3.84 percent, way below the target.
The total deposit collection of commercial banks reached Rs 590 billion, only about Rs 22 billion more compared to the Rs 569 billion at the end of the fiscal year 2009-10. Similarly, the average amount of deposit by a person also increased to Rs 20,100 from Rs 19,500. Kshetry said the reported growth deposit per person was not significant.
Despite the insignificant growth in deposits, loans and advances by commercial banks swelled to Rs 524 billion by mid-April from Rs 472.3 at the end of the last fiscal year.
With that, the average amount of loans and advances to a person increased to Rs 18,000 from Rs 16,700 at the end of the last fiscal year.
This surge in lending without a proportionate growth in deposits has increased the capital to deposit ratio leading to an intensification of the liquidity crunch.
However, Kshetry said that increased lending to the private sector was always good to the national economy.
Source: Kantipur
A proliferation of banks and financial institutions (BFIs) in the last few years may have posed a risk to financial stability, but it has done wonders to expanding the Nepali people’s access to formal banking channels.
According to the Economic Survey 2010-11, if there was one bank branch for every 29,300 people in the last fiscal year 2009-10, there was one for every 23,800 people as of mid-April 2011.
The figure is based on a comparison between the number of bank branches and the population. With the addition of 249 bank branches during the first eight months of the current fiscal year, their number has reached 1,215 as mid-April this year.
Despite a liquidity crunch in the banking sector, banks continued a massive expansion drive surpassing the addition of branches in all of the last fiscal year within eight months of the current fiscal year. A total of 214 branches were added in the last fiscal, according to the Economic Survey.
If the branches of A, B and C class BFIs are combined, the people’s access to banking channels is found to have further improved. One branch served 17,800 persons as of the last fiscal year.
The Economic Survey’s figure largely resembles the finding of the World Bank study on financial access in 2010 which shows that there were 4.19 bank branches for every 100,000 adult Nepalis. The report for 2009 showed that there were 3.2 branches for the same number of people.
However, Nepal lags behind other South Asian countries except Afghanistan, according to the World Bank report. The relatively improved figure shown in the World Bank report is due to the inclusion of micro-finance institutions as institutions providing financial access.
Former Nepal Rastra Bank governor Dipendra Bahadur Kshetry said the increased banking access was the result of the central bank’s policy to increase the outreach of banks as far as possible.
“NRB has offered incentives through its monetary policy to BFIs to enter rural areas, and they have been exploring previously untapped markets,” he said.
According to the household budget survey 2008 carried out by NRB, 59.6 percent of Nepali households had outstanding loans with institutions and 67.3 percent had outstanding loans with non-institutions suggesting that more people are still dependent on informal channels for credit.
However, the explosive increase in banking outreach has not resulted in a proportionate growth in deposits. The monetary policy’s target was to increase deposit growth by 15 percent, but the achievement was 3.84 percent, way below the target.
The total deposit collection of commercial banks reached Rs 590 billion, only about Rs 22 billion more compared to the Rs 569 billion at the end of the fiscal year 2009-10. Similarly, the average amount of deposit by a person also increased to Rs 20,100 from Rs 19,500. Kshetry said the reported growth deposit per person was not significant.
Despite the insignificant growth in deposits, loans and advances by commercial banks swelled to Rs 524 billion by mid-April from Rs 472.3 at the end of the last fiscal year.
With that, the average amount of loans and advances to a person increased to Rs 18,000 from Rs 16,700 at the end of the last fiscal year.
This surge in lending without a proportionate growth in deposits has increased the capital to deposit ratio leading to an intensification of the liquidity crunch.
However, Kshetry said that increased lending to the private sector was always good to the national economy.
Source: Kantipur
