Bank investment starts to go up

KATHMANDU, Nov 30, 2013

Loan flow from commercial banks has started to go up after the Constituent Assembly (CA) elections.

Banks have issued loans worth more than one billion rupees since the election held on November 19. Investment of banks had remained near stagnant over few months until the election due to political uncertainty.

According to bankers, total lending of commercial banks have increased to Rs 788 billion compared to Rs 787 billion recorded last week.
Commercial banks had been witnessing slowdown in demand for credits for the past few months. However, with the CA elections over, investors have started to approach banks for fresh loans.

Banks have mobilized Rs 51 billion in the first quarter of the current fiscal year. However, their lending had remained slow during the quarter. Despite being in a high liquidity position, banks had managed to invest only around Rs 33 billion during the review period.



Some banks even went to the extent of lowering interest rates for loans in different categories to increase investment. However, even it failed to increase lending.
“Investment by banks is gradually picking up and the pace will increase further if a stable government is formed with the restoration of political stability in the country,” Bhuwan Dahal, deputy CEO of Sanima Bank, said.

According to Nepal Rastra Bank (NRB), the central bank, total deposits at commercial banks stood at Rs 1,067 billion last week, up from Rs 1,066 billion recorded a week earlier. The deposits increased as money withdrawn from banks during the recent festivals started to return to banking system, officials said.

The government´s development spending increased by only 7 percent during the first quarter of the current fiscal year compared to the spending in the same period last year. Disruption in development activities before and during the elections affected demand for bank loans.

Though the government announced the annual budget in time for current fiscal year, slow development spending and low demand for loan from private sector is expected to affect overall economic growth.

The government has set a target to achieve 5.5 percent economic growth this year. However, economic growth this year is expected to hover around 4.5 percent due to slackness in economic activities in the past few months.

Source: Republica