Kathmandu, April3:
Finance
Minister Dr. Yuba Raj Khatiwada has expressed concern over the lending patterns
of the Nepali banking and financial institutions (BFIs) as about 76 per cent of
their loans have been mobilised in the non-productive sectors, such as real
estate and current asset collateral.
The BFIs lending to such sectors reached 76.1 per cent
by mid-February this year.
“Of the total loans of Rs. 2243 billion mobilised by
all the BFIs by mid-February, only Rs. 120 billion, 5.3 per cent, has been
invested in the agriculture sector. And the country’s high priority sector,
hydroelectricity, has received only 3 per cent, i.e., Rs. 68 billion,” reads
the Finance Minister’s white paper on the current economic status of the
country.
Finance Minister Dr. Khatiwada had presented the white
paper in Parliament on Friday. It depicted a grim picture of the national
economy, whichis at a critical juncture, and announced that the national
treasury was fast depleting.
According to the white paper, the size of the loans
mobilised for the productive sector and construction was 16.3 per cent and 10.6
per cent respectively. Most of the instruments of the BFIs are not being used
on national priority sectors like agriculture, manufacturing industries and
infrastructure development.Instead they have been diverted to those sectors
that have less contribution to income and employment generation.
Saying that the Nepali banking service was still
traditional, the former governor of Nepal Rastra Bank noted that
collateral-based loans and deposit mobilisation based on short-term instruments
have become the characteristics of BFIs.
“They have largely failed to mobilise loans for
knowledge, skills and commercial projects and operate long-term deposit
instruments,” he said.
He also noted that although the surge in the
interestrate on deposits might benefit the depositors, it would have severe
repercussion on investment in various important sectors of the economy, such as
agriculture, hydroelectricity, tourism and industry.
The spread rate – difference between borrowing and
lending rates – of the commercial banks last month was 5.5 per cent while for
other financial institutions, itwas even higher.
The white paper has questioned the sustainability of
the microfinance institutions as there was a high rate of customer duplication,
high operation cost and city-centric business operations.
By the end of the first six months of the current
fiscal year 2017/18, the microfinance banks had mobilised Rs. 122 billion in
loans to about 1.7 million people, but the size of their deposit mobilisation was
only Rs. 41 billion.
“Their institutional stability is challenging as there
is no guarantee of mid-term and long-term resources. In addition, the customers
are unhappy due to the costly services,” reads the paper.
Published in The Rising Nepal daily on 4 April 2018.
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