Surge in private sector loans marks positive economic momentum in Nepal

KATHMANDU: In a promising development for the Nepalese economy, the Nepal Rastra Bank (NRB) has reported a notable increase of 4.9 percent in loans extended by banks and financial institutions to the private sector during the first six months of the current fiscal year. As of mid-January, the credit flow amounted to a substantial Rs 192.64 billion.

Comparing this performance to the same period in the previous fiscal year reveals a significant acceleration. The surge in loans this year surpassed the previous year’s growth, with an increase of Rs 137.33 billion, representing a 3.0 percent rise.

Breaking down the loan distribution, the NRB data indicates a shift in allocation. By mid-January, loans to the institutional sector constituted 63.2 percent of the total, marking a decrease from the previous fiscal year’s 64.9 percent. Conversely, loans to individuals and households saw a slight uptick, comprising 36.8 percent compared to the previous year’s 35.1 percent.

Examining the performance of different financial entities during this period, commercial banks led the charge with a 4.0 percent increase in credit flow to the private sector. Development banks closely followed with a 4.4 percent uptick, while finance companies recorded a 2.4 percent rise.

The first half of the fiscal year 2023/24 witnessed a robust expansion of loans across various sectors. Notably, the agricultural sector experienced a modest but positive uptick of 1.1 percent. The industrial production sector saw a substantial 8.0 percent increase, highlighting potential economic growth and investment. The construction sector also contributed to this momentum with a 4.1 percent rise in loans.

Furthermore, the transport, communication, and public service sector witnessed a noteworthy surge of 10.6 percent, indicating increased investment in critical infrastructure and public services. The wholesale and retail trade sector experienced a 2.0 percent rise, suggesting improved economic activity in commerce.

The service sector, a crucial component of any modern economy, saw a commendable increase of 4.5 percent in loans, reflecting optimism and confidence in this segment. Lastly, the consumer sector, encompassing a wide range of goods and services, recorded a solid 7.0 percent growth in loans, signaling increased spending and economic participation.

This positive trend in private sector loans reflects a growing confidence in the economic landscape of Nepal. The diversified surge in loans across various sectors indicates a broad-based economic expansion that bodes well for the nation’s overall prosperity. As stakeholders monitor these trends, the increased credit flow is expected to fuel further economic growth and development in the coming months.