The demand for loans did not increase, 7.5 trillion was accumulated in the bank

It was expected that credit disbursement would improve with the beginning of the new financial year due to the accumulation of loanable funds in banks, interest rates falling to single digits, etc. But banks say that loan demand has not increased as expected. Keeping in mind the increasing demand during festivals such as Dasain, Tihar and Chhath this year, the traders should have already imported the material. But they say that there is no significant improvement in the loans of the banks.

As of last Thursday, the credit-deposit ratio (CD ratio) of banks and financial institutions is 78.95 percent. During the same period, the total deposit of banks and financial institutions is 64 trillion 61 billion rupees. Banks and financial institutions can lend up to 90 percent of the total deposits as per the instructions of the National Bank. Based on this, now the banks can provide additional loans equal to the amount of about 11 percentage points of deposits. This is about 7 billion rupees.

Banks and financial institutions must keep at least 20 percent of net liquid assets (net liquidity assets) of deposits. From this point of view, experts say that until last Tuesday, more than 6.5 billion have been accumulated with the banks.

In July last year, the growth rate of both deposits and loans was negative. But in July this year, the loan has increased by 2 billion," said Sunil KC, president of the Nepal Bankers' Association, "most of the interest rates have reached single digits. But the way in which the demand should increase has not been seen. He said that due to the lack of increase in loan demand, around 6 and a half billion rupees of investable funds have been accumulated in the banks. "In the last 10-15 days, there has been an improvement in loan demand," he said, "loan demand from the industry and construction sector has not increased." According to the data of Rashtra Bank, it has decreased by 19 billion and the loan flow has increased by 19 billion. In July of last year, deposits decreased by 1 trillion 59 billion and loans decreased by 17 billion. In previous years as well, the growth rate of loans and deposits both remained negative in July and increased from August. This trend has been repeated this year as well. In August last year, loans increased by 34 billion, while deposits decreased by 27 billion. Bankers say that there has been an improvement in loan demand since August this year.

Rajesh Kumar Agarwal, President of Nepal Industry Confederation, says that even though the interest rate is continuously decreasing, the industries are not in a position to take more loans due to the current capital loan guidelines issued by the National Bank. New financial year, budget (financial policy), monetary policy all came. But there was no improvement in the industry," he said. "Even now, the problems of the industry are still there, the industries are running at 30 to 40 percent capacity." He says that the problem is that the

industry has not been able to improve due to the lack of easy access to capital. "Guidelines related to working capital loans have reduced the ability to take more loans," Agarwal said, "The main impact of guidelines related to working capital loans has fallen on three sectors namely construction, industry and wholesale and retail." Sectors such as tourism, hydropower, information technology, production-based agriculture do not need so much working capital loans. However, the guidance has adopted the same policy for construction, industry and wholesale and retail trade along with other sectors. This is the reason, he said, even though there are signs of improvement in other sectors, there has been no improvement in the industry, construction and wholesale and retail trade sectors. Sectors including industry, construction, wholesale and retail business have been negative for three years, he said.

According to the guidelines regarding working capital loans, business should also be increased to take more loans. But now the business has not increased. "Neither the industry has been able to take loans, nor the banks have been able to give loans due to the lack of business growth," he said, "Even though the interest rate has fallen, industrialists have not been able to take more loans." In the productive sector, about 52 billion He said that only about 16 percent (about 8 trillion) of the loans were given to the productive sector. "The problem of the industry is not the interest rate, but the policy directives of the state," he added.

Banking expert Parshuram Kunwar said that due to the slowdown in economic activity, the demand for loans in banks has not increased due to market shortage. He said that the government should try to make the economic activities sustainable as the loan demand could not increase due to the problems in the economy. Kunwar said that after the government increases the expenditure, the economic activity will continue and then the demand for credit will also increase. "The market demand has not improved, the reasons for this may be that many young people have gone abroad, the income of those staying in the country has not increased, new jobs have not been created, etc.," he said. This also confirms that the market demand and economic activity in the economy has not increased.' At the end of June 2008, nearly 5 trillion rupees of investable funds were accumulated in banks and financial institutions. In mid-July, this amount was 3 billion 74 billion, in August 4 and a half billion, in October and October more than 5 billion. In November, March and January, the loanable amount was more than 6 trillion, but in February and March, it fell below 6 trillion. That is when the government removed the facility given to banks to count the money in local level accounts as deposits. After that, more than 6 billion in May and May and 8 billion in June were deposited in the bank. Looking at the situation so far, this year Experts say that the

may not flow as expected. In such a situation, they suggest that both the Ministry of Finance and the National Bank should encourage them to expand investment through effective dialogue with the private sector. In such a situation, the government should entrust the construction of large infrastructure projects including roads to the private sector instead of increasing the liability by taking loans.