BFIs' lending to private sector increases by only 4.3 percent to Rs 5.087 trillion in first eight months of current FY

Published On: April 18, 2024 08:48 PM NPT By: Republica | @RepublicaNepal

NRB aimed to boost BFIs' private sector lending by 11.5 percent through its monetary policy for FY 2023/24

KATHMANDU, April 18: Nepali banks and financial institutions (BFIs) increased their lending by 4.3 percent in the first eight months of the current Fiscal Year (FY) 2023/24.

A report unveiled by Nepal Rastra Bank (NRB) shows that the BFIs issued loans worth Rs 4.879 trillion to the private sector by the end of fiscal year 2022/23. As of mid-March this fiscal year, the figure increased to Rs 5.087 trillion.

This indicates that the BFIs issued additional loans totaling Rs 208 billion over the period. Of the total amount, lending on personal home loans (under the category of up to Rs 20 million) increased by 10.4 percent to Rs 384 billion.

Apart from home loans, lending also increased in areas such as imports, shares, cash credit loans, and fixed-term loans. While cash credit loans increased by 24.6 percent to Rs 643 billion, fixed-term loans increased by 15.9 percent to Rs 1.831 trillion.

Additionally, share loans increased by 12.3 percent to Rs 85.70 billion and import loans by 12.5 percent to Rs 82.07 billion. In the review period, working capital loans to business organizations declined by 10.4 percent to Rs 788 billion, real-estate loans declined by 0.5 percent to Rs 248 billion, hire purchase loans declined by 20.7 percent to Rs 126 billion, and education loans decreased by 16.2 percent to Rs 46.79 billion. Lending to production-related businesses involved in alcoholic beverages, handicrafts, and rubber tires also declined.

Region-wise, lending to manufacturing, construction, and electricity sectors saw a decrease during the period. However, lending to manufacturing businesses increased by 8.7 percent to Rs 817 billion.

The BFIs’ exposure to private sector lending was significantly less than the central bank’s target for this year. Through its monetary policy for 2023/24, the NRB had aimed to expand banks’ private sector lending by 11.5 percent in the current fiscal year.

Despite lowering their interest rates, banks have been unable to increase their lending due to low demand for loans amid low business confidence, triggered by the ongoing economic slowdown. In its recent report, the World Bank projected Nepal’s economic growth to remain at a mere 3.3 percent in the current fiscal year.