Banks Accelerate Loan Expansion as Interest Rates Drop and Demand Rises

Commercial banks have recently intensified their loan expansion campaigns. They have streamlined the loan approval process for customers, resulting in a surge in demand for loans.

Key Highlights:

Impact of Interest Rates:

• The base rate of banks has dropped to around 8%.

• The demand for loans has increased as banks offer loans at single-digit interest rates.

Loan Investment Statistics:

• By the end of the last fiscal year, banks and financial institutions had invested NPR 5.169 trillion in loans.

• By the end of the month of Shrawan, loan investment had decreased to NPR 5.162 trillion.

• However, starting in the month of Bhadra, banks increased their loan investments to NPR 5.184 trillion.

Liquidity and CD Ratio:

• Currently, banks have approximately NPR 800 billion available for investment.

• Banks have maintained over NPR 350 billion in liquidity with the central bank at an interest rate of 3%.

• The Credit-to-Deposit (CD) ratio has dropped to 78%, with some banks having a CD ratio below 70%.

Thus, while the demand for loans has increased due to lower interest rates, banks are cautiously expanding loans despite having ample liquidity.