Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: The banks and financial institutions (BFIs) in Nepal have accumulated loanable funds worth Rs 793 billion due to their inability to issue loans as expected. This situation has arisen primarily because of the low demand for credit in the market. According to Gunakar Bhatta, spokesperson for Nepal Rastra Bank (NRB), even banks without capital adequacy issues have struggled to provide adequate loans.
The NRB, through its monetary policy, aimed to increase private sector lending by 11.5 percent in the current fiscal year. However, as of the first 11 months, lending has only reached 4.7 percent. The excess loanable funds have led to the credit-deposit ratio dropping to 79.18 percent, significantly below the central bank’s prescribed ceiling of 90 percent.
NRB records indicate that BFIs have a total deposit collection of Rs 6.335 trillion but have issued loans amounting to only Rs 5.149 trillion. In the past week alone, BFIs collected an additional Rs 69 billion in deposits.
This accumulation of loanable funds highlights a significant challenge for the financial sector, which is grappling with low credit uptake despite ample liquidity. The NRB and BFIs are now tasked with addressing this disparity and finding ways to stimulate loan demand to balance the credit-deposit ratio and support economic growth.
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