Lending up and deposits down, slightly

KATHMANDU, SEP 08 -

Lending by commercial banks has increased in the last one month while deposits have slumped marginally. However, bankers said that this does not reflect that demand for loans has grown.

According to the Nepal Bankers’ Association (NBA), deposit collection has dropped to Rs 863 billion as of Aug 31 from Rs 866 billion on Aug 3. Meanwhile, loan issue rose to Rs 624 billion from Rs 616 billion over the period. In the last fiscal year, commercial banks witnessed a continuous rise in deposit collection while they had a hard time finding borrowers.

According to a recent annual report on the country’s macro-economy published by Nepal Rastra Bank, deposits in commercial banks in fiscal 2011-12 swelled 27.7 percent while lending grew 17 percent. 

Although the data shows an increasing lending trend in recent days, NIC Bank chief executive officer Sashin Joshi said demand for loans was still suppressed. “A small up and down in lending and deposit does not reflect a particular trend,” he added.

However, he said that loan demand would grow in the coming days before the Dashain and Tihar festivals to finance imports. “The declining interest rate may also help increase loans in the days to come,” he said.

Similarly, Mega Bank CEO Anil Shah said that government funds not coming to banks may be the reason behind the recent dip in deposits. “There is little demand for loans,” he said. Another banker, Anal Bhattarai, CEO of Nepal Commerz and Trust Bank, said there was no demand for long-term loans. “Demand for short-term loans to pay for imports is slowly growing with the festive season approaching,” he said.

Anil Gyawali, CEO of Nabil Bank, had a similar view. “Industry may have seen a small growth in lending, but we have had no new clients,” he said. “Deposits have also surged in our bank.”

Bankers have been blaming the country’s political stalemate and lack of a conducive business environment for the suppressed credit demand. They are of the view that a decrease in interest rates alone will not push up demand for credit.

With banks awash in excess liquidity, they have been engaged in intense competition to lure corporate clients to take short-term loans.

Source: The Kathmandu Post