Deposits, loans increase amidst COVID-19 fears

Kathmandu, Jan. 14

Deposits in banks and financial institutions (BFIs) increased by 6.5 per cent in the first five months of the current fiscal year 2019/20 against the growth of 4 per cent of the same period in the last fiscal despite the threats posed by the COVID-19 pandemic and obstructions in running businesses and industries.

On year-on-year basis, deposits expanded by 21.6 per cent in mid-December 2020, according to the Current Macroeconomic and Financial Situation Report published by the Nepal Rastra Bank on Wednesday.

The share of demand, saving, and fixed deposits in total deposits stands at 8.1 per cent, 33.1 per cent and 50.0 per cent respectively in mid-December 2020.

Such shares were 8.1 per cent, 32.0 per cent and 49.1 per cent respectively a year ago. The share of institutional deposits in total deposit of BFIs stands at 42.7 per cent. Such share was 45.4 per cent in mid-December 2019.

Likewise, private sector credit from BFIs increased by 7.1 per cent in the review period compared to a growth of 6.2 per cent in the corresponding period of previous year.

Private sector credit from commercial banks, development banks and finance companies increased by 7.0 per cent, 9.0 per cent and 0.4 per cent respectively.

According to the report, out of the total outstanding credit of the BFIs, 66.3 per cent is against the collateral of land and building and 12.1 per cent against the collateral of current assets (such as agricultural and non-agricultural products).

Similarly, loan of BFIs to agriculture sector increased by 12 per cent, industrial production sector increased by 3 per cent, construction sector increased by 3.7 per cent, transportation, communication and public sector increased by 5.6 per cent, wholesale and retail sector increased by 5.9 per cent and service industry sector increased by 9.2 per cent in the review period.

The central bank mopped up Rs. 161.80 billion liquidity including Rs. 60 billion through reverse repo auction and Rs. 101.80 billion through deposit collection instrument, and injected liquidity of Rs. 221.84 billion through the net purchase of USD 1.87 billion from foreign exchange market.

The outstanding amount of refinance provided by NRB is Rs. 24.11 billion in mid-December 2020.

Rs. 50.07 billion refinance to 40,983 borrowers has been approved by NRB in the category of bulk refinance under the provision of "Refinance Procedure, 2020".

Likewise, Rs. 20.71 billion refinance has been approved to 151 borrowers under the category of client evaluation.

The central bank also said that the average base rate of commercial banks dropped to 7.36 per cent in mid-December 2020 from 9.46 per cent a year ago.

Published in The Rising Nepal daily on 15 January 2021.