Banks and financial institutions (BFIs) increased private sector lending by 3.4 percent in the first six months of the current fiscal year, with credit growth increasingly tilted toward short-term and relatively safer loans amid rising non-performing assets.
According to the Nepal Rastra Bank (NRB)’s Current Macroeconomic and Financial Situation of Nepal report, BFIs extended new loans worth Rs 187.66 billion during the review period, raising their total loan portfolio to Rs 5.695 trillion. This represents a 6.33 percent year-on-year increase compared to the loan volume recorded by mid-January of FY 2024/25.
NRB data show that loans to non-financial institutions accounted for 62.7 percent of total lending, while loans to individuals and households made up 37.3 percent. In the same period last year, these shares stood at 64.2 percent and 35.8 percent, respectively, indicating a clear rise in lending to individuals and households.
Bankers say BFIs have increasingly prioritised home loans and margin loans, driving stronger credit growth at the individual level. “As home loans and margin loans are relatively safer in terms of recovery, BFIs have shifted their focus away from real estate project financing and overdraft facilities,” said a banker.
During the review period, lending to real estate projects declined by 5.4 percent to Rs 261.13 billion from Rs 275.95 billion, while overdraft lending fell by 3.3 percent. In contrast, personal home loans of up to Rs 20 million increased by 7.8 percent to Rs 450.01 billion.
Similarly, margin loans—extended against shares as collateral—rose by 8.3 percent to Rs 152.40 billion. Demand for such loans picked up after the central bank lifted lending caps of Rs 150 million for individuals and Rs 200 million for institutions.
Sector-wise, credit to the consumer sector grew by 9.1 percent, followed by construction (7.2 percent) and transportation, communication and public services (6.2 percent). Lending to the manufacturing sector increased by 4.4 percent, while loans to the service sector edged up by just 0.9 percent. In contrast, agricultural lending declined by 1.1 percent.
With private sector credit growth remaining sluggish as of mid-January, the central bank is likely to miss its annual lending growth target of 12 percent in FY 2025/26. In the previous fiscal year, BFIs’ lending to the private sector expanded by 8.4 percent, falling short of NRB’s target of 12.5 percent.
