Kathmandu. Nepal’s economy, which has slowed down economic activity, has been going through a dismal phase from the point of view of credit expansion for the last few years.
Current fiscal year 2081. Looking at the data till May 11, the flow of credit has increased slightly. This gradual improvement in credit expansion is not satisfactory.
In the 11 months of the current fiscal year, banks and financial institutions have extended loans worth Rs 407.62 billion to the private sector. In the same period last year, such loans had increased by 5.6 percent.
Before the fiscal year 2077. Credit flow to the private sector increased by 24.9 percent in 2017. After that, however, the rate dropped sharply. fiscal year 2078. Credit expansion increased by 13.5 percent in 2079. It was limited to only 3.4 percent in 80. 2080. Credit flow has increased from only 5.1 percent in 81 years to 8 percent in the 11 months of the current fiscal year. This has shown some signs of improvement in the economy.
Economic slowdown, tightening of monetary policy, high interest rates and ineffectiveness of government spending were some of the reasons that severely affected the investment capacity of the private sector. fiscal year 2019. From the low of 80, the current growth rate of 8 percent looks encouraging. Rastra Bank says that the reduction in interest rates and the flexibility of monetary instruments have helped in expanding credit flow.
Looking at the sectoral disbursement of credit, there is also a positive sign. In the 11 months of the current fiscal year, the loan to the construction sector increased by 12.9 percent, while the credit to industrial production increased by 8.2 percent.
Similarly, credit to service industries increased by 8.8 percent, while credit to consumer sector increased by 10.9 percent. The growth in such diverse sectors indicates that credit expansion is moving in a productive direction and not a ‘speculative’ one.
Bankers say that the easing of interest rates in recent times has made it easier to expand credit. The interest rate on loans, which was around 15-16 per cent in the past, has now come down to around 10-12 per cent. This has created an environment for the private sector to borrow.
The increase in imports and trust receipt loans also seems to have made it easier to keep the economy moving. Imports grew by 13.1 per cent and trust receipt loans by 62.2 per cent showed an increase in both demand and activity in the market. Such loans are mainly linked to business dynamics.
Similarly, the increase in margin loans by 42.8 percent has increased the activity in the stock market. Bankers say that the high remittance flow is also a factor in the increase in credit expansion.
The monetary policy for the next fiscal year has come in a flexible nature. Bankers say that this will also increase the credit expansion in the next financial year. According to them, the expansion of credit will increase in the coming fiscal year due to flexibility in current capital loan guidance, further reduction in interest rates and other policy flexibility.
