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Nepalese banks decide not to lend in auto, real estate and margin lending
                 Source: Xinhua | 2017-02-10 00:56:42 | Editor: huaxia

KATHMANDU, Feb. 9 (Xinhua) -- Nepal's commercial banks on Thursday decided to discourage lending automobile, real estate and loans against the collateral of the stocks (margin lending) as the country's banking system has been facing acute liquidity crunch.

"A meeting of Nepal Bankers' Association (NBA), a grouping of commercial banks of Nepal, decided to stop lending in these sectors until situation improves," said Kishor Maharjan, chief executive officer of Civil Bank.

"We expect it will take at least one month to improve the liquidity once the government spending starts to rise."

As a result of the government's failure to spend, around two billion U.S. dollars has been parked in the government's treasury which is just one fifth of the annual budget.

Nepal Rastra Bank (NRB), the central bank of the country on Wednesday issued directive that has made provision of penalty for failing to provide loans in the productive sectors such as agriculture, manufacturing and hydropower sectors as per the target given by the NRB. The central bank considers lending in the areas of real estate, vehicles and credit and shares as unproductive lending.

The banks have to disburse 20 percent of their total credit in the productive sector. Such credit of commercial banks was 16.21 percent in mid-December 2016.

In the current fiscal year that started in mid-July 2016, the banks lent aggressively but failed to collect deposit accordingly. According to the NBA, the banks lent 2.07 billion U.S. dollars up until January 27 and since the start of the current fiscal year they collected only 1.2 billion U.S. dollars, creating a huge deficit between deposit collection and credit expansion.

As a result, most of the banks are now short of fund to lend. As per the NRB's directive, a bank cannot provide credit of more than 80 percent of core capital and the deposit combined. But, 21 out of 28 commercial banks crossed that limit recently, according to Nepal's central bank. Enditem

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Nepalese banks decide not to lend in auto, real estate and margin lending

Source: Xinhua 2017-02-10 00:56:42

KATHMANDU, Feb. 9 (Xinhua) -- Nepal's commercial banks on Thursday decided to discourage lending automobile, real estate and loans against the collateral of the stocks (margin lending) as the country's banking system has been facing acute liquidity crunch.

"A meeting of Nepal Bankers' Association (NBA), a grouping of commercial banks of Nepal, decided to stop lending in these sectors until situation improves," said Kishor Maharjan, chief executive officer of Civil Bank.

"We expect it will take at least one month to improve the liquidity once the government spending starts to rise."

As a result of the government's failure to spend, around two billion U.S. dollars has been parked in the government's treasury which is just one fifth of the annual budget.

Nepal Rastra Bank (NRB), the central bank of the country on Wednesday issued directive that has made provision of penalty for failing to provide loans in the productive sectors such as agriculture, manufacturing and hydropower sectors as per the target given by the NRB. The central bank considers lending in the areas of real estate, vehicles and credit and shares as unproductive lending.

The banks have to disburse 20 percent of their total credit in the productive sector. Such credit of commercial banks was 16.21 percent in mid-December 2016.

In the current fiscal year that started in mid-July 2016, the banks lent aggressively but failed to collect deposit accordingly. According to the NBA, the banks lent 2.07 billion U.S. dollars up until January 27 and since the start of the current fiscal year they collected only 1.2 billion U.S. dollars, creating a huge deficit between deposit collection and credit expansion.

As a result, most of the banks are now short of fund to lend. As per the NRB's directive, a bank cannot provide credit of more than 80 percent of core capital and the deposit combined. But, 21 out of 28 commercial banks crossed that limit recently, according to Nepal's central bank. Enditem

[Editor: huaxia ]
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