Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Banks and financial institutions in Nepal disbursed Rs 368 billion in loans over the first 10 months (Shrawan to Baishakh) of the fiscal year 2081/82 (2024/25), according to Nepal Rastra Bank (NRB) data. This marks a 7.3% increase from last Asar and an 8.4% rise compared to the same period last year.
However, the figure falls significantly short of the NRB’s target of a 12.5% loan expansion, requiring a total disbursement of Rs 6.82 trillion for the year. As of Baishakh, banks have disbursed Rs 3.14 trillion less than the target, leaving a daunting task of adding Rs 3.14 trillion in the remaining two months—a feat experts deem unachievable.
A senior bank CEO, speaking anonymously, criticized the ambitious target, noting, “Last year’s 11.5% target was unmet due to an unprepared lending environment, and this year’s 12.5% goal was overly optimistic. Despite a 7% expansion so far, we must be content given the lack of investment climate improvement.” Experts attribute the shortfall to stagnant market demand, industries operating at half capacity, and an overall sluggish economy.
NRB data shows excess liquidity, with over Rs 5 trillion available for lending, and interest rates at a 47-month low. Yet, loan growth lags due to weak demand, industrial stagnation, and banks’ focus on loan recovery amid pressure on primary capital funds. Bankers Association Chairman Santosh Koirala said, “We may reach around 9% by year-end, with improved recovery potentially boosting future lending.”
NRB Spokesperson Kiran Pandit acknowledged the gap but remained optimistic. “A 4.5% economic growth rate and positive import-export trends suggest progress, though not ideal. With single-digit interest rates, there’s room for hope,” he said. Loan distribution shows 63.1% to non-financial sectors and 36.9% to individuals, with notable growth in industry (9%), construction (12.3%), and transport (11.9%). Deposits rose by Rs 3.99 trillion (6.2%), with current, savings, and fixed deposits at 5.5%, 35.9%, and 50.8%, respectively.
The challenge persists as economic revitalization and new investment avenues remain elusive.
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