Private Sector Credit Expands by 8.4 Percent

Kathmandu — In fiscal year 2081/82, credit flow from banks and financial institutions to the private sector increased by 8.4 percent (Rs. 423.73 billion). In contrast, the previous year’s growth was only 5.8 percent (Rs. 276.94 billion), reflecting a stronger expansion this year.

Of the total private sector lending during the review period, 62.8 percent went to the non-financial institutional sector, while 37.2 percent went to individuals and households. In the previous year, the shares were 63.3 percent and 36.7 percent, respectively.

By institution type, credit from commercial banks rose by 8.6 percent, from development banks by 6.1 percent, and from finance companies by 8.4 percent.

As of the end of FY 2082, 64.7 percent of loans were backed by real estate collateral, while 14.5 percent were backed by current assets (agricultural and non-agricultural goods). A year earlier, these ratios were 66.5 percent and 13.2 percent, respectively.

Looking at sectoral distribution, credit to industrial production surged by 79 percent, to transport, communication, and public services by 15.5 percent, to wholesale and retail trade by 3.4 percent, and to the service industry by 12.8 percent. However, credit to the agriculture sector declined by 0.2 percent.

By loan type, term loans increased by 7.1 percent, real estate loans (including individual housing loans) by 5.9 percent, margin-type loans by 56.2 percent, trust receipt (import) loans by 51.1 percent, hire purchase loans by 3.7 percent, and demand and working capital loans by 13.2 percent. In contrast, overdraft loans fell by 10.4 percent.

Experts note that the decline in agricultural lending is a concern, while the strong rise in credit to industrial and productive sectors is expected to have a positive long-term impact on the economy.