Bank Credit Flow Increases; Will Investment Flow into the Stock Market ?

Banks and financial institutions have recently begun to increase their credit flow. Flexible monetary policy and declining interest rates have contributed to this rise in lending. According to central bank data, banks began increasing their loan investments in the month of Bhadra. By the end of Shrawan, credit flow was at NPR 5.71 trillion, and by Bhadra 11, it had reached NPR 5.89 trillion.

Key Highlights:

• Increase in Credit Flow: NPR 18 billion in loans were disbursed in just the first 11 days of Bhadra.

• Contribution of Commercial Banks: By Bhadra 11, commercial banks had invested NPR 4.59 trillion in loans.

• Other Financial Institutions: Other banks and financial institutions disbursed NPR 597 billion in loans.

• Increase in Total Deposits: Total deposits reached NPR 6.45 trillion, with commercial banks holding NPR 5.73 trillion and other development banks and financial institutions collecting NPR 726 billion in deposits.

• Credit-Deposit Ratio (CD Ratio): The CD ratio stands at 78.96%.

Nepal Rastra Bank's Policy:

• Flexible Monetary Policy: The central bank has cautiously made the current fiscal year's monetary policy more flexible to stimulate the economy.

• Credit Expansion Target: The target for credit expansion to the private sector for the current fiscal year has been set at 12.5%.

• Reduction in Interest Rates: Nepal Rastra Bank has reduced the policy rate by 0.5 percentage points, allowing banks and financial institutions more room to lower interest rates further.

• Decline in Interest Rates: Following the monetary policy announcement, banks have reduced deposit interest rates by approximately 0.5% for Bhadra, bringing the average lending rate down to single digits.

This policy has encouraged banks to increase credit flow and has positively impacted the economy.