Kathmandu. Although the government has announced to give priority to agriculture by declaring ‘Agriculture Decade’ through the budget, the loan flow from banks and financial institutions to this sector has decreased.
According to the latest data of Nepal Rastra Bank, the fiscal year 2081. Credit to the agriculture sector shrank by 0.2 percent in 2018. The decline in investment in the agriculture sector is a reflection of the huge gap between the policy announcement and the practical situation. During the period, the total credit disbursed to the private sector from banks and financial institutions increased by 8.2 percent.
FY 2080. In 2018, the loan disbursement to the agriculture sector had reached Rs 418.59 billion. However, the fiscal year 2081. In 2018, the loan fell to Rs 417.88 billion.
The banking sector has been saying that lack of demand is the main reason for the decline in credit in agriculture. Bankers say that the demand for loans in agriculture has slowed down in the last 2-3 years.
In the past, investment in agriculture was increased due to concessional interest subsidy. However, after the government stopped it, the investment has decreased instead of increasing.
In recent times, the central bank has given policy easing to the banking sector. Bankers say it will take time to make an impact. Nepal Rastra Bank (NRB) has mandated commercial banks to invest 15 percent of their total loan in agriculture sector by Ashad end, 2085 BS. However, the 12 percent limit to be implemented in July 2082 has been approved by Governor Dr. Bishwa Poudel has reduced it to 11 percent. Bankers say that this has made it easier for more than half a dozen commercial banks.
Bankers say that there is no clear demand for investment in Nepal as commercial agriculture is still low. Most of them are engaged in farming only for livelihood, so there is no situation to ask for loans. Due to this, there is no demand for loans, said a banker.
Even if the production is a little more, there is no end to the market and the problem of not getting the price of the produce has also prevented the farmers from taking interest in commercial agriculture. Bankers say, “Therefore, there is no situation to increase the demand for loans.” It is also facing problems due to the inability to compete with imports. ’
Lately, the NPL of agricultural loans has been close to double digits. This is putting the banks in trouble. The central bank claims that regulatory flexibility has been adopted in view of this.
Experts say that although there is immense potential in the agriculture sector, farmers are not getting the price, high cost and uncertainty in the market.
