Commercial banks expand loans by 5.62pc in seven months of current FY

KATHMANDU: In the seven-month period from Shrawan to Magh of the current fiscal year, commercial banks in Nepal have expanded their loan portfolios by 5.62% . Loan expansion is the core business of banks, and those that have successfully increased lending during this period are expected to see positive impacts on their financial performance.

According to data from the Nepal Bankers Association (NBA) , as of Ashadh-end, the total loan disbursement by 20 commercial banks stood at NPR 457.091 billion . However, by the end of Magh, this figure had increased by NPR 25.694 billion , reaching a total of NPR 482.785 billion .

In contrast, deposit collection growth during the same period has been relatively slower. Deposits grew by only 4.21% over the seven months. As of Ashadh-end, total deposits stood at NPR 575.477 billion , which increased by NPR 24.228 billion to reach NPR 599.705 billion by the end of Magh.

The recent uptick in loan expansion has been highlighted by Santosh Koirla , President of the Nepal Bankers Association. “Demand for loans has increased, and accordingly, disbursements have also risen,” he stated. He added that indicators suggest sufficient loan flow will continue in the coming year. “The increase in loan disbursements also signals that the domestic economy is gaining momentum,” Koirla remarked.

Leaders in Loan Expansion

Among commercial banks, Global IME Bank has emerged as the leader in loan expansion. Over the seven-month period, the bank disbursed an additional NPR 40 billion in loans. Notably, Global IME Bank also ranks first in terms of overall loan disbursement, with its total loan portfolio reaching NPR 431 billion by the end of Magh.

On the other hand, Nepal Investment Mega Bank leads in deposit mobilization. The bank increased its deposit collection by NPR 40 billion within the same seven-month period.

Challenges for NIC Asia Bank

In contrast, NIC Asia Bank has experienced a decline in both deposits and loans. Over the seven months, the bank’s deposits decreased by NPR 5.822 billion , while its loan disbursements fell by NPR 3.288 billion . This dual decline raises concerns about the bank’s ability to maintain its competitive position in the market.

Loan Growth Outpaces Deposit Growth

A notable trend observed during this period is that loan growth has outpaced deposit growth. While loans expanded by 5.62% , deposits grew by only 4.21% , indicating a widening gap between the two. This disparity highlights the challenges banks face in maintaining liquidity while meeting growing credit demands.

Implications for the Economy

The increase in loan disbursements reflects growing economic activity, particularly in sectors such as trade, industry, and services. Experts believe that the rise in credit flow indicates businesses are investing more, which could stimulate further economic growth. However, the slower growth in deposits compared to loans underscores the need for banks to focus on deposit mobilization to sustain lending activities.

Key Statistics:

Total Loan Disbursement (Magh-end): NPR 482.785 billion

Loan Growth Rate (Shrawan-Magh): 5.62%

Total Deposit Collection (Magh-end): NPR 599.705 billion

Deposit Growth Rate (Shrawan-Magh): 4.21%

Top Performer in Loan Expansion: Global IME Bank (+NPR 40 billion)

Top Performer in Deposit Mobilization: Nepal Investment Mega Bank (+NPR 40 billion)