Kathmandu. Bankers who lend to shares and real estate have started strategising even after reducing interest rates.
With high liquidity in the banking system, banks have started competing to expand loans by making interest rates cheaper. With the credit-deposit ratio (CD ratio) falling to 76 per cent, banks are competing to lend at cheaper interest rates. Its direct benefits have reached the stock market and real estate sector.
At present, banks are offering collateral loans at 6-7 per cent interest rate. According to investors, although banks have not made public the formal scheme, they are aggressively proposing to lend shares at a constant interest rate. As a result, the demand for share mortgage loans to invest in the stock market is increasing in the bank.
In the last 11 months, the share mortgage loan has increased by more than Rs 35 billion. Investors and bankers believe that such credit growth will continue to increase.
The real estate sector is also witnessing a similar situation. Banks have introduced a fixed interest rate scheme of around 6 percent on real estate loans.
Meanwhile, the Rastra Bank has reduced the risk burden of share mortgage loans to 100 percent in the monetary policy. The personal loan limit has been raised to Rs 250 million and there is no limit for institutional investors. This seems to have encouraged more investment flows.
Bankers have started thinking that it is better to move to the profitable sector rather than increasing the cost by increasing liquidity. Therefore, they have been aggressive in expanding share mortgage loans and loans towards real estate.
Nepal’s banking system currently has an investment of Rs 950 billion. As inflation is also low, policymakers have adopted a strategy to ease the flow of investment by reducing interest rates.
Nepal Rastra Bank (NRB) has encouraged the regulatory reserve allocated for non-banking to invest in the capital fund for two years. Also, bankers say that they are giving share loans at cheaper interest rates with the right shares given to institutions under pressure from the capital fund.
Krishi Bikas Bank has been providing margin lending loans from a minimum of 5.84 percent to a maximum interest rate of 8.34 percent. Everest Bank is offering share loans ranging from 6.27 percent to 8.27 percent. Rastriya Banijya Bank has been providing share loans from 6.3 to 6.8 percent, Siddhartha Bank from 6.34 to 9.59 percent and Citizens Bank from 6.35 to 9.35 percent.
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