Banks record higher lending growth rate
KATHMANDU, NOV 07 -
Credit issue by commercial banks has outpaced deposit collection in the first quarter of the fiscal year. According to Q1 deposit-lending statistics, banks seem to have become more liberal in issuing loans. The overall lending of commercial banks in Q1 grew by Rs 39 billion while deposits increased by Rs 10 billion.
Figures released by Nepal Rastra Bank (NRB) show that deposits with commercial banks reached Rs 872 billion as of mid-October from Rs 862 billion in mid-July. Meanwhile, lending rose to Rs 657 billion from Rs 618 billion during the review period.
Bankers attributed the surge in lending to import growth, a liberal lending approach by banks and the central bank’s insistence on increasing credit to sectors like agriculture. In the past three months, banks adopted a liberal lending policy and it played a significant role in credit growth.
“Earlier, banks were not sure about how long the situation of comfortable liquidity would last,” said Ashoke Rana, CEO of Himalayan Bank and president of the Nepal Bankers’ Association (NBA). “However, their confidence is currently high.”
Commercial banks have been aggressive in issuing housing and automobile loans of late. Remittance is fuelling consumption, and consumption financing has been one of the easier sectors for commercial banks to venture into. “Commercial banks are engaged in a price war, and they have been launching different housing and automobile loan products,” said a CEO of a commercial bank. “Banks are offering interest rates as low as 10 percent on home and auto loans.”
A stronger dollar has made imports dearer, and this has led to a rise in lending to finance imports. “Our lending to finance trade and imports has gone up due to the strong dollar,” said BN Gharti, deputy general manager of Kist Bank.
A forceful lending policy adopted by Nepal Rastra Bank has also contributed to the credit surge by commercial banks , according to bankers. The central bank issued a directive in mid-January telling commercial banks to maintain their lending to the agriculture and energy sectors at a minimum of 10 percent of their total lending portfolio. Category A financial intermediaries are required to maintain such a portfolio by mid-July 2014.
Before the directive was issued, lending to agriculture and farm-based industries accounted for less than 3 percent of the total lending portfolio of all the commercial banks . Currently, it is well above 4 percent, according to an NRB official.
Source: The Kathmandu Post
