Demand for Loans in Nepali Banks Begins to Rise: Overview of the Situation

According to Nepal Rastra Bank, NPR 8 billion in loans were disbursed by banks in a single day on Bhadra 24. Until the previous day, the total loan investment of banks and financial institutions was NPR 5.205 trillion, which increased to NPR 5.213 trillion on Bhadra 24.

Key Economic Indicators:

• Loan Disbursement: NPR 8 billion disbursed on Bhadra 24.

• Total Deposits: Decreased by NPR 5 billion, down to NPR 6.479 trillion.

• Average CD Ratio (Credit to Deposit Ratio): 79.02% (up from 78.87% the previous day).

• Interbank Interest Rate: 3%.

Measures by Nepal Rastra Bank for Liquidity Management:

• Instruments Deployed:

  • Bhadra 26: Attempted to withdraw NPR 40 billion through a 21-day deposit collection instrument; banks participated with only NPR 9.05 billion (average interest rate 2.99%).

  • Bhadra 23: Attempted to withdraw NPR 100 billion through a 21-day deposit collection instrument; banks participated with NPR 53.8 billion, and NPR 51.8 billion was withdrawn (average interest rate 2.94%).

• Standing Deposit Facility (SDF):

  • Bhadra 27: Banks placed NPR 164.95 billion in SDF for 3 days.

  • Bhadra 25: Banks placed NPR 175.7 billion in SDF for 3 days (interest rate 3%).

Current State of the Banking Sector:

• CD Ratio: The current CD ratio of banks and financial institutions is 79.02%, indicating that banks still have an investable amount of around NPR 650 billion.

• New Policy Reforms:

  • Nepal Rastra Bank has facilitated banks by easing the pressure on their capital funds.

  • Allows for a 20% risk weight on priority shares and loan purchases.

CD Ratios of Major Banks:

• Government Banks:

  • Rastriya Banijya Bank: 60.29% (most favorable for credit expansion).

  • Nepal Bank: 72.44%.

  • Agricultural Development Bank: 78.46%.

• Private Banks:

  • Nepal SBI Bank: 73.56%.

  • Global IME Bank: 76.84%.

  • Standard Chartered Bank: 76.84%.

  • Laxmi Sunrise Bank: 77.74%.

  • NIC Asia Bank: 79.14%.

  • Prabhu Bank: 79.79%.

Capital Fund Ratios of Banks:

• Banks in a Favorable Position:

  • Standard Chartered Bank: In the most favorable position.

  • Kumari Bank: Core capital ratio at 8.56%.

  • NIC Asia Bank: Core capital ratio at 8.44%.

Conclusion:

There is an improvement in loan expansion within the banking sector, with banks reducing investments in long-term instruments and increasing them in short-term ones. As government revenues have also increased, there are signs of economic recovery in Nepal. The credit-to-deposit ratio and capital fund ratios of banks are improving, enhancing their capacity for loan expansion.