Lending of commercial banks declines

 Kathmandu, Aug 18

The first month of the current fiscal year 2020/21 has witnessed a sharp decline in lending by the commercial banks, returning to the negative growth trend a couple of months earlier.

The class ‘A’ commercial banks have mobilised Rs. 2878 billion credit till Shrawan (mid-August 2020) which was Rs. 2903 billion in mid-July. The Nepal Bankers’ Association (NBA) said that the lending was about Rs. 25 billion negative to that of the previous month, the last of the FY 2019/20.

Credit mobilisation had slipped to negative growth in mid-April to mid-May and mid-May to mid-June although it was in the positive growth trajectory rest of the year. It decreased by Rs. 9 billion by mid-May and by Rs. 20 billion in mid-June. The highest amount of credit mobilisation was made in the last month of the last fiscal year with the growth of Rs. 87 billion.

This is the fourth month in the last five years the commercial banks’ lending slipped in to the negative growth. Earlier, it had witnessed a decrease by Rs. 3 billion in mid-July to mid-August in 2017/18.

Likewise, the deposits decreased by Rs. 8 billion and reached Rs. 3479 billion in mid-August from Rs. 3487 in mid-July this year. The deposits had caught negative trend in the first month of the last fiscal year as well when it decreased by Rs. 23 billion.

The deposits and lending have gone down in foreign currency terms as well. Deposits have decreased by Rs. 13 billion in mid-August and reached Rs. 112 billion compared to mid-July while the lending has gone down to Rs. 91 billion from Rs. 97 billion from the previous month.

According to the NBA, the lockdown and shutdown and disturbances in the business as well as industry operations following the coronavirus outbreak about five months ago had contributed to the decline.

The trend is likely to continue given the resurgence of the pandemic and various restrictive measures imposed across the countries, especially in the industrial and business areas. Most of the metropolis and sub-metropolis have imposed lockdown, shutdown and even curfew to force people to stay at home and maintain social distancing in order to contain the spread of the virus.

In the last five years, the lending has increased to almost Rs. 2.89 trillion from Rs.1.08 trillion in mid-July 2015/16. Similarly, the deposits have increased to about Rs. 3.47 trillion from Rs. 1.45 trillion in July 2015/16.

Published in The Rising Nepal daily on 19 August 2020.