Deposits increased by 433 billion in seven months, while credit flow was only 2.5 billion.
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For the past seven months (Shrawan to Magh), credit has not expanded as expected in banks and financial institutions. The economy has remained stagnant due to lack of economic activity. Bankers say that there has been no improvement since the start of the fiscal year, when credit expansion has not picked up speed.
As Chaitra is the last month of the third quarter, banks have focused on loan recovery and loan demand has not increased as expected, said Santosh Koirala, President of the Nepal Bankers Association. ‘It cannot be said that the overall loan demand has increased if 2/4 loans increase. Because it is the last month of the third quarter, most banks are focused on loan recovery,’ he said, ‘Deposits are increasing. However, loan demand has not increased.’
Although the impact of the Israel-Iran war has begun to be felt in Nepal’s market, Koirala said that the financial system has not yet been affected. ‘Looking at the activities of other countries, including neighboring countries, the Nepali economy does not appear to be immune to the impact of the Israel-Iran war,’ he said, ‘However, the banking sector has not been affected immediately.’
Banks and financial institutions have collected deposits of Rs 433 billion in the last seven months (Shrawan to Magh). This is an increase of 6 percent compared to the same period last year. With this, the total deposits of banks and financial institutions have reached Rs 7697.59 billion as of last Magh. In the seven months of last year, deposits in banks and financial institutions increased by 3.8 percent, or Rs 245.34 billion. On an annualized basis, deposits in banks and financial institutions increased by 14.9 percent as of mid-Magh 2082, according to the data of the Nepal Rastra Bank.
Similarly, as of mid-Magh 2082, the share of current accounts in the total deposits of banks and financial institutions is 6.5 percent, savings 42.8 percent and fixed deposits 41.6 percent. In the seven months of last year, such shares were 5.2, 34.8 and 52.4 percent respectively. Similarly, as of mid-Magh 2081, the share of institutional deposits in the total deposits of banks and financial institutions is 34.3 percent. In mid-Magh 2081, the share of such deposits was 35.3 percent.
In the last seven months, banks and financial institutions have disbursed loans of Rs 221 billion 840 million. This is an increase of 4 percent compared to the same period last year. With this, the total loans disbursed by banks and financial institutions as of last Magh has reached Rs 5719 billion 540 million.
According to the National Bank, credit flow increased by 5.6 percent, or 283.46 billion rupees, in the first seven months of the last fiscal year. Year-on-year, credit flow has increased by 6.8 percent until last Magh. This year, the National Bank has set a target of credit expansion of 12 percent. Experts say that with only about four months left until the end of the fiscal year, credit will expand by only 6/7 percent of the target at most.
