Home Business BFIs extends Rs 4.5 billion new loans to service sector

BFIs extends Rs 4.5 billion new loans to service sector

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Loan flow to tourism, educational services falls

Kathmandu, November 3, 2016: Bank and financial institutions (BFIs) have extended Rs 4.52 billion worth of loans to service sector in the first two months of the current Fiscal Year 2016/17.

According to the Nepal Rastra Bank (NRB), the outstanding credit of the BFIs in service sector stands at Rs 131.1 billion as of mid-September, up by 3.6 percent compared to the corresponding period of the last fiscal year. In the corresponding period of last year, loans toward service sector had increased by only 1.3 percent, or Rs 1.37 billion, to Rs 109.37 billion in outstanding credit.

In the service sector, ‘Hotel’ sub-sector was the biggest recipient of loans in the review period. BFIs have added Rs 2.34 billion of loans to hotels. Their outstanding credit in the hotel sub-sector as of mid-September is Rs 42.25 billion. This is the highest outstanding credit in the service sector.

Similarly, the BFIs floated Rs 1.64 billion of loans to ‘other service companies’ in the review period, propelling the total outstanding credit in this sub-sector to Rs 22.63 billion.

Similarly, BFIs injected fresh loans of Rs 35.3 million to advertising agency, Rs 56.1 million to automotive services, Rs 510.9 million to hospitals, clinic and health service, and Rs 15.7 million in entertainment, recreation and films sub-sectors. Growth of loans to the tourism (trekking, mountaineering, resort, rafting and camping, among others) and educational services, however, went into negative terrain. Loans to these sub-sectors fell by Rs 60.1 million and Rs 21.1 million, respectively, to Rs 114.18 billion and Rs 27.11 billion.

According to bankers, pick up in lending to the service sector after depressed growth indicates that investment and business is expanding or new projects are coming in. The overall credit to the private sector increased by 3.5 percent in the review period compared to a growth of 0.9 percent in the same period of the previous year. Similarly, credit to the agriculture sector went up by 4.2 percent, industrial production sector by 2.4 percent, construction  sector by 4.3  percent, wholesale  and  retail  trade  sector by 3.9  percent, and  transport,  communication  and  public  sector by 4  percent.

Total credit flow of BFIs to the real estate sector amounted to Rs 260.01 billion (including Rs 149.50 billion residential home loans) in mid-September 2016.  This is 15 percent of total credit exposure of BFIs.  Similarly, total  margin  lending (loans extended against shares as collateral) stood  at  2.1  percent (Rs 37.33 billion) of  their  total  credit  exposure as at mid-September. Credit to small and medium enterprises was only 2.5 percent (Rs 36.68 billion) of the total lending of BFIs as at mid-September.