KATHMANDU, Aug 25: Banks and financial institutions (BFIs) increased private sector lending by 8.4 percent in the last fiscal year, up from 5.8 percent a year earlier, according to a report published by Nepal Rastra Bank (NRB) on Sunday.
Despite the growth, the BFIs fell short of the NRB’s target of 12.5 percent for the review period. In fiscal year (FY) 2024/25, BFIs extended Rs 423.73 billion in credit to private businesses, compared to Rs 276.94 billion in the previous year. The lending boost comes amid an economic slowdown and excess liquidity in the banking system, which had made it difficult for BFIs to deploy their funds.
Economist Keshav Acharya said the rise in private sector lending, coupled with moderated inflation, indicates a slow economic recovery. “The government must focus on restoring investor confidence,” he told Republica.
Credit flow from commercial banks to the private sector rose 8.6 percent, while development banks and finance companies recorded growth of 6.1 percent and 8.4 percent, respectively. Sectorwise, BFIs’ lending to non-financial institutions accounted for 62.8 percent of total loans, while individual and household loans made up 37.2 percent. In the previous fiscal year, these figures were 63.3 percent and 36.7 percent, respectively.
Real estate absorbed the largest share—64.7 percent—of total private sector loans, followed by 14.5 percent for current assets related to agricultural and non-agricultural goods. In the prior year, these ratios stood at 66.5 percent and 13.2 percent.
Lending to the manufacturing sector increased by 7.9 percent, while loans to transport, communication, and public services surged by 15.5 percent. Similarly, credit flow to the wholesale and retail trade sector grew by 3.4 percent, and the service industry sector saw an increase of 12.8 percent. However, lending to the agricultural sector recorded a slight decline of 0.2 percent.
BFIs inject additional Rs 50.6 billion in margin loans
BFIs increased loans against shares by Rs 50.6 billion in FY 2024/25, a 56.2 percent rise, according to NRB’s report titled Current Macroeconomic and Financial Situation of Nepal.
With this increase, margin loan portfolios surged to Rs 137.84 billion from Rs 90.09 billion a year ago. The growth was driven largely by big investors seeking opportunities in the secondary market.
Loans above Rs 10 million grew by 76.9 percent to Rs 98.92 billion, while loans between Rs 5 million and Rs 10 million rose 29 percent to Rs 16.02 billion.