KATHMANDU, June 11: Banks and Financial Institutions’ (BFIs) private sector lending increased by only 5.7 percent in the first 10 months of the current fiscal year, less than half of the 12 percent target set by Nepal Rastra Bank (NRB).
The central bank had announced in its monetary policy that credit flow to the private sector should expand by 12 percent in FY 2025/26. With just two months remaining in the fiscal year, BFIs would need to raise lending significantly beyond the pace achieved so far if the target is to be met.
According to NRB records, BFIs issued loans worth Rs 312 billion during the review period, bringing total private sector lending to Rs 5.809 trillion. In the same period last year, such credit had grown by 7.3 percent (Rs 368.68 billion). On an annual basis, private sector credit rose by 6.7 percent as of mid-May.
Revised interest rate corridor system introduced
Bankers said sluggish economic activity amid political transition has limited demand for loans, while rising non-performing assets have restrained BFIs from aggressive lending.
Of the total private sector lending this fiscal year, 62.7 percent went to the non-financial institutional sector, while 37.3 percent was directed to individuals and households.
In the review period, credit issuance of the commercial banks, development banks, and finance companies increased by 5.8 percent, 5.0 percent, and 2.9 percent, respectively, under the heading.
Likewise, the BFIs’ lending based on fixed property as collateral stood at 63.5 percent, down from 65.1 percent in the review period last year. Lending against current assets of agricultural and non-agricultural goods stood at 14.9 percent, similar to last year’s ratio.
Sector-wise, loans to construction rose by 12.8 percent, consumer lending by 12.3 percent, transport, communication and public services by 10.9 percent, industrial production by 6.8 percent, and the service industry by 3.3 percent. Loans to finance, insurance and immovable assets increased by 1.0 percent, while lending to agriculture declined by 2.3 percent.
Under loan categories, issuance of trust receipt (import) loans surged by 36.1 percent, margin lending by 15.5 percent, hire purchase loans by 9.1 percent, and real estate loans (including personal residential home loans) by 5.3 percent. Working capital loans rose by 4.3 percent, term loans by 4.0 percent, and cash credit loans by 0.4 percent. In contrast, overdraft loans decreased by 0.7 percent.
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