Agro sector had received loans worth Rs 23.3 billion from commercial banks as of mid-July 2012. But by mid-July 2013 the figure went up to Rs 31 billion. Despite the increment, commercial banks’ loan exposure to the agriculture sector stood at four per cent of the total lending, while energy sector’s share stood at mere two per cent.
Commercial banks have to extend at least 10 per cent of their total loans to agriculture and energy sectors by the end of current fiscal year.
As of mid-July 2013, commercial banks, development banks and finance companies had floated loans worth Rs 39.7 billion to various agricultural projects. In the same period a year ago, these institutions had provided loans worth Rs 28.5 billion to the sector.
Despite the jump in annual statistics, the growth rate has remained pretty low. The banking sector’s total exposure to agro and farming loans stands at mere 4.1 per cent of the total lending, although agriculture’s contribution to GDP hovers around 35 per cent.
Among 31 commercial banks, credit portfolios of only seven banks show lending exposure of over Rs one billion to the agro sector. So far, Agriculture Development Bank Limited has remained the biggest lender to the sector with credit worth Rs 13.2 billion extended to projects related to agriculture and farming. The loans extended by the bank to agro and farming projects make up 24 per cent of its total lending, according to NRB data.
“We basically support agro, farming, poultry and fisheries sectors despite our involvement in other areas. That is why our loan portfolio contains more of these loans,” pointed out CEO of ADBL Tej Bahadur Budhathoki. “Moreover, any farmer who is looking for bank credit first approaches our bank,” he added.
Financing received by the sector has more than doubled in the last two years since NRB made it mandatory for commercial banks to extend certain portion of loans to the productive sector — agro and energy.
“To raise agro and energy sectors’ access to finance, NRB has recently raised commercial banks’ mandatory lending bar for these sectors. Now it has also made it mandatory for financial institutions to extend certain portion of their loans to these sectors,” NRB spokesperson Bhaskar Mani Gyanwali said. According to a recent directive, commercial banks will have to channel at least 12 per cent of the total credit flow to agriculture and energy sectors by the mid-July 2015. Likewise, by mid-July 2016 development banks will have to increase lending to these sectors to 15 per cent of their total loan portfolio, while finance companies will have to extend up to 10 per cent of their total loans to these sectors.
source: the himalayan times,16 Oct 2013
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