Kathmandu. The slowdown in the banking sector is yet to improve. As the private sector has not increased the demand for credit, there is more pressure on the banking sector.
The interest rate of banks has reached a low point. However, there has been pressure on the banking sector as the recovery of old loans has not accelerated and the flow of additional loans has not picked up pace.
Deposits in banks are on the rise. Nepal Rastra Bank (NRB) has been continuously drawing money from the banking system to manage more liquidity. Banks are also being forced to keep money in the central bank at low interest rates.
Due to lack of expansion of credit, the cost of banks is increasing, while non-banking assets are piling up in banks due to lack of recovery of old loans.
The average bad loan (NPL) of commercial banks stood at 5.05 per cent in the third quarter of the current fiscal year (July-April). Non-banking assets worth Rs 38.41 billion have been accumulated in commercial banks. This is an increase of Rs 8.23 billion compared to the same period last year. Commercial banks had non-banking assets worth Rs 30.17 billion as of Mid-July 2018.
Similarly, the average NPL of development banks is 5.56 percent till mid-March of the current fiscal year. Development banks have accumulated non-banking assets worth Rs 3.72 billion till December this year. As of Mid-July, development banks have non-banking assets worth Rs 3.36 billion.
On the other hand, npl of finance companies has increased to 13.04 percent by mid-March of the current fiscal year. As of December 2018, the finance company’s non-banking assets stood at Rs 2.67 billion. The non-banking assets stood at Rs 1.96 billion as of Mid-July last year.
The bad loans of the banks and financial institutions stood at 5.24 percent as of Mid-March of the current fiscal year. A total of Rs 44.80 billion worth of non-banking assets of banks and financial institutions have been accumulated. As of Mid-July, there were non-banking assets worth Rs 35.50 billion. In the last nine months, banks and financial institutions have accumulated an additional Rs 9.29 billion in non-banking assets.
