In the eight months of the current fiscal year (from Shrawan to Falgun), banks and financial institutions have extended additional loans worth Rs 243.54 billion. This is an increase of 4.4 percent compared to last Ashar. With this, it has reached Rs 57.41 billion. 244 billion.

Experts say that banks and financial institutions have not been able to expand loans as expected due to the long-term sluggish economy, industries operating at less than half capacity, and the failure to create an investment environment.

The National Bank has set a target of 12 percent loan expansion in the current fiscal year. For this, about Rs 5.5 billion additional loans need to be extended. Experts say that the annual target is unlikely to be met.

The latest developments in the country have not created an investment environment, and the demand for loans in the financial sector has not increased. Experts say that the new government should work hard to increase their confidence as the confidence of the private sector has fallen sharply.

In the eight months of the last fiscal year, the credit expansion was worth Rs 34.82 billion. This was an increase of 6 percent compared to Ashar 2080. According to the data of the National Bank, the credit flow from banks and financial institutions to the private sector increased by 6.7 percent on an annualized basis as of mid-Falgun 2082.

‘As of Falgun 2082, the share of credit flowed to the non-financial institutional sector out of the credit flowed to the private sector from banks and financial institutions is 62.7 percent and the share of credit flowed to the individual and household sector is 37.3 percent,’ the monthly report of the National Bank states, ‘In the same period of the previous year, such shares were 63.2 and 36.8 percent respectively.’

In the last eight months, the growth rate of credit flowed by commercial banks is 4.6 percent, development banks 3.5 percent and finance companies 1.9 percent. Of the loans invested by banks and financial institutions, 15 percent are secured by current assets (agricultural and non-agricultural goods) while 63.8 percent are secured by real estate. According to the data of the National Bank, the share of loans invested in such collateral was 14.5 and 65.2 percent respectively as of mid-February 2081.

In the last eight months, loans to the consumer sector increased by 10.5 percent, construction sector by 8.8 percent, transport, communication and public service sector by 7.7 percent, industrial production by 5.6 percent, and service industry by 1.8 percent. However, during that period, loans to the agricultural sector decreased by 2 percent and loans to the finance, insurance and real estate sectors by 2.7 percent, according to the National Bank.

From last Shrawan to Falgun, trust receipt (import) loans increased by 23.2 percent, margin loans by 11.1 percent, hire purchase loans by 8.6 percent, demand and other working capital loans by 3.9 percent, real estate loans (including personal residential home loans) by 3.5 percent, term loans by 3.2 percent, and cash credit loans by 1.6 percent. Overdrafts decreased by 2.7 percent during the same period. Deposit collection in banks and financial institutions increased by 6.6 percent to Rs 482.1 billion during this period.

Since Chaitra is the last month of the third quarter, banks' focus has shifted to 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. But loan demand has not increased.'

Although the impact of the Israel-Iran war has begun to be seen in Nepal's market, Koirala said that the financial system has not yet been affected. 'Looking at the activities of neighboring countries and other countries, it does not appear that the Nepali economy will be untouched by the impact of the Israel-Iran war,' he said, 'However, the banking sector has not been affected immediately.'

In the first nine months of the current fiscal year (up to Chaitra 24), banks and financial institutions have accumulated 1.22 trillion lent money (excess liquidity). Liquidity has been accumulating in banks for about three years. The increase in remittances in recent days has accelerated the accumulation of money in banks. As of Chaitra 24, the total deposits in banks and financial institutions are 7.8 trillion 16 billion. During the same period, the credit-deposit ratio (CD ratio) is 74.03 percent.

As per the instructions of the National Bank, banks and financial institutions are allowed to lend up to a maximum of 90 percent of total deposits. The total credit flow of banks and financial institutions during this period is 5844 billion. Based on the above data, banks and financial institutions have an amount of 1190 billion rupees available for lending (excess liquidity) as of mid-Ashar. However, banks and financial institutions must keep 20 percent of their total deposits in cash in the bank.