While the investment climate in the country has not improved, the unstable situation created after the 23 Bhadra agitation and the 24 Bhadra demonstration has further worsened the situation. This is confirmed by the fact that while deposits increased in the first five months of this year compared to the same period of the last fiscal year, credit flow decreased.

From last Shrawan to 23 Mangsir, banks and financial institutions have collected a total of 239 billion rupees in deposits and disbursed only 75 billion rupees in loans. While deposits increased during the same period of this year compared to the first five months of the last fiscal year, loan flow decreased. From Shrawan to 24 Mangsir of the last fiscal year, deposits increased by 146 billion rupees and loan flow by 154 billion rupees.

With the expansionary budget and monetary policy this year, it was expected that loan flow would increase and the loanable amount accumulated in banks would decrease. There were signs of an increase in loan demand in the initial months. However, the five-month loan flow data does not have any possibility of meeting the NRB's objective. Due to the lack of loan flow, more than 10 trillion rupees of loanable amount (excess liquidity) has been accumulated in banks and financial institutions continuously. 

Interest rates have fallen to their lowest point in history. According to the general theory of economics, there is an inverse relationship between interest rates and loan flow. When interest rates fall, loans increase and when they rise, they decrease. This principle does not seem to be working now. Experts say that even though interest rates have decreased, other factors are still active, so credit demand has not increased. 

Birendra Raj Pandey, President of the Confederation of Nepalese Industries, said that industrialists have not been able to invest more due to political instability and questions about security. “We are encouraging industrialists to increase investment,” he said. “The country’s investment environment and security are their main focus.”

According to the data of the National Bank, deposits decreased by 63 billion and loans by 17 billion in Shrawan. Deposits increased by 90 billion in Bhadra, leading to an increase of 53 billion in loans. Deposits increased by 183 billion in Asoj. Credit flow was 46 billion in that month. Deposits decreased by 3 billion and loans by 29 billion in Kartik. Deposits increased by 25 billion as of 23 Mangsir, while loans increased by 22 billion. 

Kamlesh Agrawal, President of the Nepal Chamber of Commerce, says that the investment environment in the country deteriorated and credit demand decreased due to five reasons. First, more than 1.5 million borrowers have been blacklisted in the last five years. This has prevented the private sector from building capital. Second, banks and financial institutions have started selling collateral in a hurry to recover loans.

This has led to a decrease in the valuation of collateral, which has reduced the morale of the private sector. Third, working capital is the guiding principle of credit. As a result, entrepreneurs have not been able to take loans even if necessary. ‘Fourth, political instability and fifth, lack of security in the personal and professional sectors have not improved the investment environment,’ he said.   

The Nepal Rastra Bank has set a target of expanding credit by 12.5 percent in the last fiscal year. To meet this target, banks and financial institutions had to expand credit by Rs 682 billion. But the credit disbursed by banks till last Ashar was Rs 251 billion less than the target. The Nepal Rastra Bank has set a target of expanding credit by 12 percent in the current fiscal year.

The National Bank, which had set a target of 11.5 percent credit expansion in the fiscal year 2080/81, had set a target of 12.5 percent for last year. Despite the fact that the credit expansion target was not met in previous years, a target of 12 percent has been set again this year. But only about 75 billion rupees have been disbursed as of 23 Mangsir. 

Financial sector expert Parashuram Kunwar Chhetri said that the recent developments in the country have not created an investment environment. ‘In the current situation, no investor wants to invest, there should be an investment-friendly environment for investment,’ he said.  Nepal Bankers Association President Santosh Koirala said that the demand for credit has not improved. ‘The situation is very disappointing, although some credit has increased in share collateral, the overall credit has not increased,’ he said, ‘Only deposits have piled up. There is no demand for credit. Banking activity is very slow.’ 

Despite their best efforts through policies to expand credit, the credit flow has not been as expected due to the country's situation, said Guru Prasad Poudel, spokesperson of the National Bank. 'The situation was different when the monetary policy was issued on 27 Ashad. There were signs that the environment would improve in the new fiscal year,' he said, 'However, the investment environment has not been created due to the Gen-G movement, the political instability that followed, and the damage caused by unseasonal rains.' 

By the end of the first five months of the current fiscal year, banks and financial institutions have accumulated a loanable amount (excess liquidity) of 1.12 trillion. Liquidity has been accumulating in banks since two and a half years ago.  In recent days, the increase in remittances has accelerated the accumulation of money in banks.

As of 23 Mangsir, the total deposits in banks and financial institutions are 7543 billion. The credit-deposit ratio (CD ratio) during the same period is 74.27 percent. According to the instructions of the Nepal Rastra Bank, banks and financial institutions are allowed to lend up to a maximum of 90 percent of their total deposits. The total credit flow of banks and financial institutions during this period is 5.6 trillion 66 billion.