Banks will have to maintain their lending to productive sectors including agriculture, tourism, energy and cottage and small industries upto 20 percent within the next three years.
Following the monetary policy provisions that the commercial banks will have to double their lending to productive sectors from their average lending status, the central bank asked them to submit a workplan for the same by mid-January next year. The current exposure of banks’ lending to these sectors is 10 percent on an average.
As per the new circular issued by the NRB on Wednesday, banks irrespective of their current exposure in the productive sectors, will have to maintain their lending to these at 20 percent. The provision is also applicable to the banks licensed after mid-July this year, according to NRB.
It means the banks currently have around Rs 46 billion investment in the productive sectors which they have to increase to Rs 92 billion within another three years. Currently, commercial banks have a lending of Rs 474 billion as of the second month in the current fiscal year. The monetary policy has taken the stance of discouraging loans to the realty sector and encouraging lending to productive sectors.
The central bank’s directive issued two weeks ago tells the banks to reduce their lending to realty sector to 10 percent within the next two years. Excessive lending to the realty sector till the first half of last fiscal year pushed the financial sector into a crisis. The central bank then took stringent measures to reduce lending to the realty sector by imposing limitations on realty exposure.
“The latest two circulars regarding realty and productive sectors is to encourage banks to reduce their lending to realty and increase lending to productive sectors,” said a senior NRB official.
Agriculture is among the least favoured sectors for lending although lending to the sector grew by 6.8 percent year against a decline of 3.6 percent the preceding year. The tourism sector, however, witnessed a heavy rise of 33 percent in banking lending last year before the Nepal Tourism Year 2011. The tourism sector had faced a decline in lending the previous year.
Regarding the new directive, Nepal Bankers’ Association Vice-president Rajan Singh Bhandari said banks have no problem increasing lending to productive sectors provided there is a favourable business climate.
Bankers say there is no environment for investment in the productive sectors due to load-shedding, labour problems and political instability. The UCPN (Maoist) had vowed not to allow licensed Indian companies to develop hydropower projects.
Another banker, chief executive officer of NMB Bank Upendra Poudel, also finds it challenging to increase the lending to 20 percent within three years. “We cannot go to hydropower wherever it is,” he said. “We have a little set up for lending to agriculture.”
Lately, deposits have shrunk and credit has increased to some extent as of the second month of the current fiscal year. Deposits declined by Rs 11 billion and credit grew by 12 billion against the figure at the end of last fiscal year. The decline in deposits may limit the banks’ lending capacity. However, the monetary policy has said that it will redefine the productive sectors to ease banks’ lending to these sectors if they are unable to lend due to credit and deposit ratio.
source:ekantipur.com
Following the monetary policy provisions that the commercial banks will have to double their lending to productive sectors from their average lending status, the central bank asked them to submit a workplan for the same by mid-January next year. The current exposure of banks’ lending to these sectors is 10 percent on an average.
As per the new circular issued by the NRB on Wednesday, banks irrespective of their current exposure in the productive sectors, will have to maintain their lending to these at 20 percent. The provision is also applicable to the banks licensed after mid-July this year, according to NRB.
It means the banks currently have around Rs 46 billion investment in the productive sectors which they have to increase to Rs 92 billion within another three years. Currently, commercial banks have a lending of Rs 474 billion as of the second month in the current fiscal year. The monetary policy has taken the stance of discouraging loans to the realty sector and encouraging lending to productive sectors.
The central bank’s directive issued two weeks ago tells the banks to reduce their lending to realty sector to 10 percent within the next two years. Excessive lending to the realty sector till the first half of last fiscal year pushed the financial sector into a crisis. The central bank then took stringent measures to reduce lending to the realty sector by imposing limitations on realty exposure.
“The latest two circulars regarding realty and productive sectors is to encourage banks to reduce their lending to realty and increase lending to productive sectors,” said a senior NRB official.
Agriculture is among the least favoured sectors for lending although lending to the sector grew by 6.8 percent year against a decline of 3.6 percent the preceding year. The tourism sector, however, witnessed a heavy rise of 33 percent in banking lending last year before the Nepal Tourism Year 2011. The tourism sector had faced a decline in lending the previous year.
Regarding the new directive, Nepal Bankers’ Association Vice-president Rajan Singh Bhandari said banks have no problem increasing lending to productive sectors provided there is a favourable business climate.
Bankers say there is no environment for investment in the productive sectors due to load-shedding, labour problems and political instability. The UCPN (Maoist) had vowed not to allow licensed Indian companies to develop hydropower projects.
Another banker, chief executive officer of NMB Bank Upendra Poudel, also finds it challenging to increase the lending to 20 percent within three years. “We cannot go to hydropower wherever it is,” he said. “We have a little set up for lending to agriculture.”
Lately, deposits have shrunk and credit has increased to some extent as of the second month of the current fiscal year. Deposits declined by Rs 11 billion and credit grew by 12 billion against the figure at the end of last fiscal year. The decline in deposits may limit the banks’ lending capacity. However, the monetary policy has said that it will redefine the productive sectors to ease banks’ lending to these sectors if they are unable to lend due to credit and deposit ratio.
source:ekantipur.com
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