The banking sector struggled to lend during the first quarter of the current fiscal year due to sluggish growth in lending during the period, show Nepal Rastra Bank statistics. A, B and C class banks and financial instituitons (BFIs) disbursed loans worth Rs 31.11 billion as against Rs 51.79 billion in the same period last fiscal year, according to the central bank. Such a scenario has emerged amid complaints from the bankers about low demands for loans and excess liquidity. The first quarter also witnessed a decrease in total loan disbursed to the private sector. The BFIs extended loans worth Rs 37.66 billion to the private sector in first quarter this year as against Rs 45.27 billion in the same quarter last year. Chief of research department at the NRB Min Bahadur Shrestha pointed out two factors—rise in the value of US dollar against domestic currency and the Constituent Assembly election—were mainly responsible for slow credit growth this quarter. “People were discouraged to open letter of credit and take credit for imports due to surge in dollar price,” said Shrestha. “On the other hand, investors waited for the election to get over to take out loans for initiating any project.” He expects a higher growth in credit in the upcoming days. However, deposit mobilisation was better compared to the same period last year. The BFIs collected new deposits amounting to Rs 49.64 billion in first quarter this year as against Rs 24.97 billion last year. During the period, the balance of payment (BoP) recorded a surplus of Rs 52.74 billion, dwarfing the surplus of Rs 2.05 billion in the first quarter last fiscal. Despite massive imports, the BoP has remained positive for the past two and half years. Remittance is largely responsible for Nepal’s comfortable BoP level. The remittance inflow surged by 38.2 percent to Rs 135.03 billion compared to 28.8 percent growth in the corresponding period last year. On a monthly basis, remittance inflow increased by 53.4 percent during mid-September to mid-October compared to the previous month, according to the NRB. Shrestha said that the weakening of domestic currency against US dollar means people received more remittance in Nepali rupees. Country’s foreign exchange reserve also soared to Rs 606.82 billion in mid-October. The reserve will be sufficient to finance merchandise imports for 12.3 months, and merchandise and service imports for 10.4 months, according to the NRB. During the first quarter this fiscal year, both import and export growth however slowed compared to the first quarter last year. Exports grew by 11.3 percent compared to 14.9 percent in the first quarter last fiscal, NRB statistics show. The country witnessed a growth of 11.3 percent in imports compared to the rise of 36.1 percent in the first quarter last fiscal. Imports from both India and third countries slowed this year, according to the report. On the other hand, export to India surged but it slowed in the case of other countries. Despite the inflation dropping to 8.4 percent in mid-October this year compared to 10.5 percent in the corresponding period last year, there has been rise in price since mid-August this year. The rise in food price is driving the inflation, jacking up prices of food items by as much as 10 percent and non-food items by 6.9 percent. Source: The Kathmandu Post
Posted on: Tue, 26 Nov 2013 05:04:12 +0000
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