January 23: There has been an improvement in credit flow to the industrial sector due to the ease in liquidity crunch along with decline in interest rates and refinancing facility. The record of Nepal Rastra Bank (NRB) shows credit flow to the industrial sector increased in the last fiscal year (FY 2022/23).

According to the Annual Economic Activity Report 2022/23 published by the central bank recently, credit flow to the industries expanded by 10.8 percent in the last fiscal year. Prior to that, credit flow to the industrial sector had declined by 8.5 percent in FY 2021/22 due to liquidity crisis and high interest rates.

According to the report of the NRB, banks and financial institutions (BFIs) provided loans worth Rs 1387.44 billion to the industrial sector in FY 2022/23. Such loans disbursed in FY 2021/22 amounted to Rs 1251.96 billion.

While there has been an improvement in credit flow to the industrial sector, the growth rate of credit to the service sector remained lower than the previous year in FY 2022/23. The service sector credit increased by 13.7 percent in the fiscal year 2021/22 but increased by only 6.2 percent in FY 2022/23.

According to the report of the central bank, out of the total loans disbursed by banks and financial institutions, the share of industrial sector loans is 28.4 percent. In the last fiscal year, the highest credit went to the non-food product manufacturing industry at 38.99 percent. Similarly, 22.17 percent loans were disbursed to the electricity, gas and water related industries, 19.91 percent to the agriculture, forestry and beverage related industries, 12.81 percent to construction related industries, 5.27 percent to metal products, machinery and electronic related industries and 0.86 percent to the mining related industries.

Among industrial loans, Bagmati Province witnessed the highest loan investment of Rs 954.01 billion, while Karnali Province saw the lowest loan investment of Rs 3.98 billion.

Out of the loans in the service sector, the highest loans were given to the wholesaler and retailer sub-sector at 50 percent, followed by 12.2 percent in the real estate sub-sector, 10.7 percent in the tourism sub-sector, 9.8 percent in the finance, insurance and real estate sub-sector, and 5.5 percent in the education sub-sector. A total of 4.9 percent loans were disbursed to the transport, storage and communication sub-sector, 3.7 percent to other service sub-sector and 3.3 percent to health and other social work related sub-sector.