In recent months, Nepal’s banking sector has witnessed a decline in the overall demand for private sector loans, with commercial banks disbursing slightly fewer loans. Between mid-October and mid-November, there was a marginal reduction of 0.14%, bringing the total loans disbursed down from Rs 5.287 trillion to Rs 5.280 trillion.
However, banks have shifted focus towards providing more loans for the purchase of automobiles and shares. Notably, lending for automobile purchases, particularly electric vehicles (EVs), has seen a surge. Banks have increased their loans for automobile purchases by Rs 1.77 billion, with the total hire-purchase lending rising from Rs 124.94 billion to Rs 126.71 billion. The demand for EV loans has been particularly strong, boosted by lower interest rates, as banks offer loans at rates as low as 7.5% annually. The import of EVs has also been significant, with over 3,400 units imported in the first four months of the fiscal year.
Simultaneously, loans for purchasing shares have increased, rising from Rs 105.82 billion to Rs 107.76 billion. This growth can be attributed to the Nepal Rastra Bank’s recent relaxation of share-mortgage loan policies, which removed the Rs 200 million cap on institutional share collateral loans. Banks are now allowed to invest up to 40% of their primary capital in share-mortgage loans, fueling the increase in lending for shares.
While the overall demand for loans in other sectors like hydropower and construction is gradually increasing, the commercial banks’ focus on shares and automobiles has become more prominent. Despite the slight dip in overall private sector credit, the NRB has set a target for a 12.5% increase in private sector lending by the end of the fiscal year.
