Agriculture credit growth sluggish

Despite the government's efforts to encourage lending to agriculture sector, credit flow to the sector grew by only 3.9 percent, or Rs 2.54 billion, in the first seven months of 2015/16. In the same period last year, credit flow of bank and financial institutions (BFIs) to agriculture sector had grown by 14.7 percent or Rs 7.5 billion. Agriculture sector has an outstanding credit of Rs 67.7 billion as of mid-February this year, according to a report released recently by the Nepal Rastra Bank. Credit growth to agricultural sector is lower than total credit growth of bank and financial institutions (BFIs). Lending to private sector went up by 7.1 percent, or Rs 95.2 billion, to Rs 1,473.89 billion in the first seven months of 2015/16. In the same period last year, BFIs credit to private sector had increased by Rs 116.9 billion. "Credit disbursement in major areas such as industrial production, wholesale and retail trade, and agriculture in the first seven months of 2015/16 remained lower compared to last year," the macro economic situation report for the seven months of 2015/16 released by NRB states. Lending to industrial production sector rose by 8.4 percent, or Rs 21.54 billion, in the review period. BFIs have outstanding debt of Rs 277.1 billion in the industrial production sector. Similarly, BFIs' credit to wholesale and retail trade sector expanded by 6.8 percent, construction sector by 4.7 percent, and transport, communication and public services sector by 15.4 percent. BFIs have total credit outstanding of Rs 317.84 billion in wholesale and retail trade sector. Likewise, credit to construction sector stands at Rs 160 billion as of mid-February while transportation, communication and public services sector borrowed a total of Rs 69.3 billion in the review period. In the first seven months of 2015/16, banks and financial institutions extended 59.8 percent of their total credit against collateral of land and building, and 13 percent against collateral of current assets like agricultural and non-agricultural products. Of the total lending, credit to small and medium enterprises increased by only 2.7 percent, or Rs 31.62 billion, in the review period. Credit growth is lower than deposit growth of BFIs, shows the report. According to the report, the total deposits of BFIs rose by Rs 137.87 billion to Rs 1,826.7 billion, compared to a growth of 5.9 percent in the corresponding period of 2014/15. NRB data shows that deposits in commercial banks, development banks and finance companies increased by 8.8 percent, 4.7 percent and 7.4 percent, respectively, in the review period. Source: Republica