Wholesale and retail sector takes largest chunk of bank loans
KATHMANDU, NOV 02 -
The wholesale and retail sector received the biggest chunk of bank loans as of mid-September in a reflection of the financing trend of banks and financial institutions (BFIs) which is heavily skewed towards ever-growing imports.
According to Nepal Rastra Bank (NRB), the manufacturing sector came second in terms of borrowing from banks followed by the construction sector. The central bank’s statistics show that the wholesale and retail sector received Rs 139.74 billion out of the total loan issue of Rs 722.68 billion as of the second month of the current fiscal year. The manufacturing sector borrowed Rs 130.54 billion while the construction sector received credit worth Rs 82.85 billion.
Finance, insurance and real estate received Rs 80.13 billion. Among the 15 categories, other major receivers of bank loans are the service sector including hotels and restaurants, consumption loans and transportation, communication and public utility goods. The agriculture sector is one of the most neglected sectors with just Rs 24.42 billion going into it.
NRB deputy governor Maha Prasad Adhikari said that the growth of trading instead of industry was reflected in the lending of BFIs. “Their investment in the agriculture sector has remained disappointing, and we have prioritised increasing investment in the productive sector including agriculture in the monetary policy,” he added.
In order to redirect overexposure of loans to the productive sector from the unproductive sector, the central bank has inserted a provision in the monetary policy which requires BFIs to increase their lending to agriculture, energy, tourism and small and cottage industries in the amount of at least 20 percent of their industry average within the next three years.
“As most Nepali farmers are engaged in subsistence farming instead of commercial farming, banks are not making significant lending to agriculture production,” said Parshuram Kunwar Chhetry, chief executive officer of Bank of Asia, Nepal. He, however, added that banks had issued a significant amount of loans to the agro processing sector.
With the country heading towards a conclusion of the peace process, Chhetry hoped that there would be an appropriate environment to make significant lending to the productive sector including agriculture and manufacturing, among other areas.
The entire banking system is now in trouble because of excessive lending to the unproductive realty sector as loan recovery continued to remain dismal due to a downturn in realty transactions.
NRB data shows different priorities of A, B, C and D class BFIs.
For commercial banks, the manufacturing sector is still the first priority with their lending to the sector surpassing all other sectors. They lent Rs 115.64 billion to the manufacturing sector and Rs 105.33 billion to the wholesale and retail sector. The third highest amount of loans of commercial banks went to the finance, insurance and real estate sectors followed by the construction sector. Commercial banks made total lending worth Rs 528.66 billion as of mid-September.
Meanwhile, development banks lent the most to the wholesale and retail sector followed by the construction, transport and communication and manufacturing sectors respectively. Their total lending stood at Rs 93.41 billion as of the second month of the current fiscal year.
Finance companies were partial towards the construction sector with the largest share of their loans going to this sector followed by the wholesale and retail sector. The finance, insurance and real estate sector came third and the transportation and communication sector stood fourth in receiving loans from C class financial institutions.
However, for D class FIs including cooperatives and micro-finance institutions licensed by NRB, the agriculture sector is the first priority followed by the finance, insurance and real estate sector and the wholesale and retail sector.
Source: Kantipur
