Lending growth rate exceeds deposit expansion
KATHMANDU:
Lending growth rate of commercial banks surpassed deposit growth rate in the first five months of the current fiscal year, as remittance income grew at a very slow pace, while credit demand remained robust than in the last fiscal.
Deposits of commercial banks went up by 5.5 per cent in the five-month period between mid-July and mid-December, shows the latest report of Nepal Rastra Bank (NRB). During the same period, credit expanded by 8.1 per cent.
Thirty commercial banks of the country had deposits of Rs 1.196 trillion as of mid-July, which went up to Rs 1.262 trillion by mid-December. In the same period last fiscal, deposits had grown by 6.3 per cent.
Deposit growth rate of banks fell this fiscal due to rapid decline in growth rate of workers’ remittance.
Nepalis working abroad sent a total of Rs 227.20 billion in the first five months of this fiscal year, marking a moderate growth of 2.7 per cent. In the same period last fiscal, remittance income had gone up by 35.3 per cent to Rs 221.18 billion.
While lower growth rate of remittance income exerted pressure on expansion of deposit base, credit demand remained robust this fiscal than in the last fiscal year.
As of mid-July, the credit portfolio of commercial banks stood at Rs 1.13 trillion. This amount went up to Rs 1.22 trillion by mid-December.
Banks extended biggest chunk of loans to wholesale and retail sector in the five-month period, show NRB data. The sector absorbed Rs 23.30 billion in credit in the five-month period, mostly to import goods. With this, the total amount of loan extended to the sector stood at Rs 267.54 billion as of mid-December.
The second biggest chunk of credit went to production sector in between mid-July and mid-December. The sector obtained Rs 21.64 billion in credit from various commercial banks. Of this amount, Rs 9.62 billion went to iron and steel plants, Rs 2.94 billion was absorbed by cement factories and Rs 1.33 billion went to plastic industries, shows the NRB report.
With the extension of all these loans, total credit absorbed by production sector stood at Rs 244.32 billion as of mid-December.
Another big absorber of credit in the five-month period was the construction sector, which received Rs 13.37 billion in loans from commercial banks. Of this amount, the biggest chunk of loans, or Rs 11.83 billion, went to the residential construction sector, followed by heavy construction sector — such as building of roads and bridges — which took away Rs 1.06 billion in bank credit.
With these loans, construction sector has received Rs 132.94 billion in credit from commercial banks as of mid-December.
Although lending to all the sectors went up in the first five months of the fiscal year, credit to the mining sector declined by Rs 79.90 million, which shows that repayments are surpassing loan issuance.
Source: THT
