Significant Growth in Private Sector Lending by Banks and Financial Institutions

Toward the end of the current fiscal year 2081/82, bank and financial institutions (BFIs) in Nepal have shown notable improvement in credit investment. According to Nepal Rastra Bank (NRB), enhanced economic activity in recent months has led to a significant rise in credit flow to the private sector.

As per NRB data, BFIs disbursed a total of NPR 407.62 billion in loans to the private sector during the first 11 months of the current fiscal year. In the same period last year, the disbursed amount was limited to NPR 246.80 billion, indicating a sharp increase in credit flow this year.

By the end of Jestha 2082, the year-on-year growth of credit to the private sector reached 8.7 percent. Out of the total disbursed credit, 63 percent went to the non-financial institutional sector, while 37 percent was directed toward individuals and households. During the same period last year, the ratio was 63.5 percent and 36.5 percent respectively.

Looking at institutional contributions, commercial banks recorded an 8.4 percent growth in lending, development banks posted a 4.7 percent increase, and finance companies observed a 6.9 percent rise.

Lending to industrial and service sectors has also shown notable expansion. Credit to industrial production increased by 8.2 percent, the construction sector by 12.9 percent, wholesale and retail trade by 5.2 percent, transportation, communication, and public services by 13.5 percent, the service industry by 8.8 percent, and the consumption sector by 10.9 percent.

In terms of collateral, 14.5 percent of total credit was secured by current assets, while 65 percent was backed by real estate and land.

Based on loan types, term loans increased by 5.1 percent, margin loans by 42.8 percent, trust receipt (import) loans by 62.2 percent, hire purchase loans by 5.5 percent, cash credit by 0.6 percent, and real estate loans (including personal housing loans) by 5 percent.

This sharp increase in private sector credit is seen as a sign of recovery and growing confidence in Nepal’s economic momentum.