KATHMANDU, FEB 23 - 2012
The proliferation of banks and financial institutions (BFIs) may have done wonders to expanding Nepali people’s access to formal banking channels, but Kathmandu Valley is still the largest market for BFIs when it comes to deposits and lending.
According to The Economic Survey, there was one bank branch for every 23,800 people in 2010-11 compared to one for every 29,300 people in 2009-10, thanks to BFIs’ aggressive expansion drive. But the valley accounts for a majority of financial activities of banks, according to a recent study of Nepal Rastra Bank (NRB). The study shows that about 70 percent of total bank deposits is collected from the three valley districts—Kathmandu, Bhaktapur and Lalitpur—and around 65 percent of the total lending in done within the valley.
According to the central bank’s ‘Economic Activities Study Report’, of the total bank deposits of Rs 725.90 billion at the end of fiscal year 2010-11, Rs 493.01 billion (67.91 percent) was collected from the three valley districts. Similarly, of the total lending of Rs 586.50 over the period, Rs 375.72 billion (64.64 percent) is lent within the valley.
Bankers did not find the statistics surprising. They say the figures reflect the state of country’s economy—economic activities concentrated in the valley. “The bank branch expansion has definitely made people’s access to formal financial system easier, but economic activities did not expand simultaneously,” said NIC Bank CEO Sashin Joshi. “A Majority of businesses have their offices in Kathmandu and their activities are concentrated here. Therefore, the credit flow is concentrated here.”
According to regulators, another major reason behind the deposit/lending concentration within the Kathmandu Valley is due to the demographic concentration. “Population in the valley is high,” said Maha Prasad Adhikari, deputy governor at NRB. “Also, the earning and spending capacity of the people living within the valley is higher compared to those living in other parts of the country.”
Due to issues like infrastructural constraints and improper supply chain, economically active people—both business person and employees—live in the valley. This concentration, according to bankers, will take some time to disperse. “Once there is infrastructural development in other part of the country and more employment opportunities are created there, this trend will discontinue,” said Ajay Shrestha, CEO of Bank of Kathmandu. “Also, as it has been only three years since BFIs went for massive expansion drive, it will take some more years for other parts of the country to be the major market for them.”
Apart from the valley, bank deposit/lending concentration is seen in urban cities. According to Joshi, cities like Pokhara, Butwal, Biratnagar, Birgunj and Nepalgunj are major contributors to his bank’s deposit portfolio and a majority of lending done in cities like Birgunj, Biratnagar and Pokhara.
The NRB report shows deposit/lending concentration is declining, but at a ‘very slow’ pace. The valley accounted for 69.90 percent of the total deposits in 2008-09 and 69.12 percent in 2009-10.
In case of lending, 65.58 percent of total credit flow was within the valley in 2008-09, which came down to 64.88 percent in 2009-10.
Source: Kantipur
The proliferation of banks and financial institutions (BFIs) may have done wonders to expanding Nepali people’s access to formal banking channels, but Kathmandu Valley is still the largest market for BFIs when it comes to deposits and lending.
According to The Economic Survey, there was one bank branch for every 23,800 people in 2010-11 compared to one for every 29,300 people in 2009-10, thanks to BFIs’ aggressive expansion drive. But the valley accounts for a majority of financial activities of banks, according to a recent study of Nepal Rastra Bank (NRB). The study shows that about 70 percent of total bank deposits is collected from the three valley districts—Kathmandu, Bhaktapur and Lalitpur—and around 65 percent of the total lending in done within the valley.
According to the central bank’s ‘Economic Activities Study Report’, of the total bank deposits of Rs 725.90 billion at the end of fiscal year 2010-11, Rs 493.01 billion (67.91 percent) was collected from the three valley districts. Similarly, of the total lending of Rs 586.50 over the period, Rs 375.72 billion (64.64 percent) is lent within the valley.
Bankers did not find the statistics surprising. They say the figures reflect the state of country’s economy—economic activities concentrated in the valley. “The bank branch expansion has definitely made people’s access to formal financial system easier, but economic activities did not expand simultaneously,” said NIC Bank CEO Sashin Joshi. “A Majority of businesses have their offices in Kathmandu and their activities are concentrated here. Therefore, the credit flow is concentrated here.”
According to regulators, another major reason behind the deposit/lending concentration within the Kathmandu Valley is due to the demographic concentration. “Population in the valley is high,” said Maha Prasad Adhikari, deputy governor at NRB. “Also, the earning and spending capacity of the people living within the valley is higher compared to those living in other parts of the country.”
Due to issues like infrastructural constraints and improper supply chain, economically active people—both business person and employees—live in the valley. This concentration, according to bankers, will take some time to disperse. “Once there is infrastructural development in other part of the country and more employment opportunities are created there, this trend will discontinue,” said Ajay Shrestha, CEO of Bank of Kathmandu. “Also, as it has been only three years since BFIs went for massive expansion drive, it will take some more years for other parts of the country to be the major market for them.”
Apart from the valley, bank deposit/lending concentration is seen in urban cities. According to Joshi, cities like Pokhara, Butwal, Biratnagar, Birgunj and Nepalgunj are major contributors to his bank’s deposit portfolio and a majority of lending done in cities like Birgunj, Biratnagar and Pokhara.
The NRB report shows deposit/lending concentration is declining, but at a ‘very slow’ pace. The valley accounted for 69.90 percent of the total deposits in 2008-09 and 69.12 percent in 2009-10.
In case of lending, 65.58 percent of total credit flow was within the valley in 2008-09, which came down to 64.88 percent in 2009-10.
Source: Kantipur
1 comment:
Survey like these are very important because these kind of surveys will help develop not just financial institutions but other companies outside of valley too. This shows that thou lots of manufacturing and production companies are out side of valley they don't need as much loan as other sectors.
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