Nepalese banks' credit flow down by 5%

The credit flow of 32 Nepalese commercial banks to various sectors dropped 5 percent in the first seven months of the current fiscal year.

The banks extended Rs 36.18 billion in loans in the seven-month period through mid-February, as against Rs 38.14 billion recorded in the same period last year, latest figures compiled by the Nepal Rastra Bank show.

Bankers attributed the cause to stagnancy seen in the real estate market and slump seen in the manufacturing sector that have started affecting various sectors of the economy as well.

The data shows that credit flow in the production sector, which absorbed over 35 percent of the total bank loans, fell by 21 percent to Rs 13.59 billion in the seven-month period from Rs 17.21 billion in the same period last fiscal year.

Loans extended to wholesalers and retailers also slumped to Rs 5.13 billion in the first seven months, as against Rs 10.9 billion in the same period last fiscal year.

The services sector was not any better in absorbing bank credit as loans extended to the sector dipped to Rs 2.78 billion in the review period from last fiscal year´s Rs 3.29 billion.

Credit extended to import vehicle, aircraft and their parts also plunged by over 71 percent to Rs 394.4 million this year from Rs 1.39 billion recorded in the seven-month period last year.

However, not all sectors have seen shortfall in flow of credit this year.

Agriculture sector, for instance, attracted Rs 4.74 billion in loans in the first seven months of the current fiscal year. The sector had attracted credit of Rs 822.5 million in last fiscal year.

Although the central bank in January had directed banks to extend at least 10 percent of the total loan to agriculture and energy sectors, few bankers expressed surprise over the huge credit growth in a small period of time.

However, others like Rajan Singh Bhandari, whose Citizens Bank has introduced micro loans of up to Rs 500,000 for farmers and others related with agriculture sector, said there was huge demand for such loans.

“In a week, my bank was able to issue Rs 20 million worth of 500,000-rupee loans,” he said.

Likewise, loans to construction sector also went up by a whopping 141 percent to Rs 4.99 billion from Rs 2.07 billion last year. Similarly, loans to mining sector topped Rs 959.5 million this year, up 431 percent from last year´s Rs 180.4 million.

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