Private sector lending in Nepal has seen a notable increase following a reduction in interest rates by Banks and Financial Institutions (BFIs).
According to the Current Macroeconomic and Financial Situation Report by Nepal Rastra Bank, BFIs issued Rs 73.39 billion in credit to the private sector in the first two months of the fiscal year, reflecting a 1.4 percent growth compared to Rs 33.60 billion (0.7 percent) during the same period last fiscal year. Year-on-year, private sector credit grew by 6.6 percent as of mid-September 2024.
This lending growth is attributed to excess liquidity in the banks, leading to a decrease in the base interest rate, which fell to 6.03 percent in October. In terms of sector-specific loans, there were modest increases across various sectors: agriculture (0.2 percent), production (0.9 percent), construction (1.2 percent), wholesale and retail (1.2 percent), transportation and communication (2.2 percent), service industry (1.7 percent), and consumable goods (1.1 percent).
The composition of outstanding loans shows that 13.2 percent are backed by current assets, while 66.2 percent are secured against land and buildings.
