Credit disbursement by financial institutions accelerated during the initial quarter of the current fiscal year. According to central bank figures, institutions distributed an extra Rs133 billion in loans between 17 July and 11 October. This marks a notable increase compared to the Rs30 billion expansion registered across the corresponding period in the previous fiscal year. Despite the stronger lending activity, the banking system continues to hold a substantial surplus of loanable funds. Observers attribute this condition to sluggish credit absorption relative to the steady pace of deposit growth. At the same time, banking executives report rising loan requests from various sectors including manufacturing, hydropower, real estate, share margin lending, and small and medium enterprises. Additional indicators point to increased trade activity, with commercial banks recording an average twenty percent growth in issued letters of credit between mid-June and 14 October. Nonetheless, financial experts and senior banking professionals recommend prudence when evaluating the headline growth metrics. They emphasize that true economic recovery depends on lending converting into sustained investment and actual production.
Credit flows rise as banks sit on surplus funds
Financial institutions extended an additional Rs133 billion in credit during the first quarter.
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In short
- Financial institutions extended an extra Rs133 billion in credit between 17 July and 11 October.
- The lending increase was more than four times higher than the Rs30 billion recorded last fiscal year.
- Letters of credit issued by commercial banks rose by an average of 20 percent through mid-October.
From public sources and the WeNepal research team
https://wenepal.com/article/credit-flows-rise-as-banks-sit-on-surplus-funds-20261016
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