Bank loans jump over five-fold

The banking sector witnessed over five-fold jump in credit issuance in the first two months of the current fiscal year over the same period a year ago, as demand for loans surged following normalisation in the supply situation after the trade blockade imposed by India was lifted. Banks and financial institutions (BFIs) extended Rs54.3 billion in loans between mid-July and mid-September, as against Rs9.9 billion in the same period a year ago, shows the latest macroeconomic report of Nepal Rastra Bank, the central bank. “Demand for credit has gone up across the board from hydroelectric and tourism sectors to real-estate and retail sectors,” Laxmi Bank CEO Sudesh Khaling had earlier told the Post. “This is happening because borrowers are unleashing the pent-up credit demand of the period when business activities suffered due to devastation caused by earthquakes and supply disruptions along Nepal-India border points.” Also businesses rushed to cater to the consumer demand that goes up sharply during Dashain, pushing up the credit demand, the bankers said. Demand for loans from the wholesale and retail sector, which makes a contribution of 22 percent to the total credit portfolio of all BFIs, soared by six folds in the first two months, shows the NRB report. The sector obtained Rs14.4 billion in loans in the two-month period, as against Rs2.4 billion recorded in the same period a year ago. Also, the demand for loans from the production sector, which has soaked up 17 percent of the total loans extended by BFIs so far, rose 163 percent in the period between mid-July and mid-September from a year earlier. Many production units were operating at far lower capacity than in normal days due to earthquakes of April and May 2015 and Indian trade embargo, which continued from fourth week of September 2015 to first week of February 2016. But with the normalisation of the situation, credit demand is going up. The production sector obtained Rs7.1 billion in loans in the two-month period, as against Rs2.7 billion in the same period a year ago. Another sector that saw huge growth in credit demand was construction. Many physical infrastructure project developers had either postponed construction plans or slowed down the pace of construction because of the earthquakes and trade blockade. But with the return of normalcy, various project developers have started reaching out to banks. The sector, which makes a contribution of 11 percent to the total credit portfolio of all BFIs, obtained Rs7.8 billion. Source: ekantipur