Bank lending drops by half as firms thrash

Kathmandu January 27- Lending by commercial banks has nearly halved as businesses are struggling due to the effects of the April 25 earthquake and Indian trade embargo.

According to the Nepal Bankers Association (NBA), banks issued loans amounting to Rs73 billion during the first half of the current fiscal year 2015-16, which is about half of what they lent during the same period in the last fiscal year. Loans issued in the first six months of last year amounted to Rs126 billion. 

Between July 17, 2015 and January 15, 2016, the overall lending by commercial banks grew from Rs1,102 billion to Rs1,175 billion. In the previous fiscal year, lending had grown from Rs900 billion to Rs1,026 billion during the period July 16, 2014 to January 16, 2015.

Bankers said that lending had slowed during the review period mainly due to the political unrest in the Tarai over dissatisfaction with the new constitution and the Indian trade embargo.

As per the data of Nepal Rastra Bank (NRB), credit growth in every sector has decreased during the first five months of the current fiscal year. 

 According to bankers, there is a trend among big borrowers to repay the loans of one bank by borrowing from another bank which also contributed to a rise in loans during this fiscal year. Also banks have been hesitant to respond positively to fresh loan requests considering the current political situation and prospects for new projects in the current environment. However, they expect things to improve in the second half of this fiscal.

NBA data also shows that there has been some improvement in lending since mid-December. While total bank loans amounted to Rs44 billion before December 18, they swelled by Rs29 billion as of January 15. Source: