Banks Struggle to Lend Despite Adequate Capital

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Banks Struggle to Lend Despite Adequate Capital

August 4: It has been two weeks since the government lifted lockdown, but the flow of loan from banks has not seen any significant improvement. Although the banks have lowered the rate of interest, very few customers have visited the banks seeking new loans.

Commercial banks had availed loan of Rs 86 billion between mid-June to mid-July. But they have been able to lend only Rs 36.95 billion as of July end during the last 15 days of the month.  

All 27 commercial banks of the country are yet to recover a total loan of Rs 2903 billion as of mid-July 2020. The outstanding loan has dropped to Rs 2866.05 billion as of July end.

Although the flow of loan from banks has dropped significantly, there has been an increase in deposits of late. During mid-June to mid-July, commercial banks collected deposits worth Rs 129 billion. The collection of deposits dropped to Rs 490 million in the last 15 days of July.

The total deposits of all the commercial banks was Rs 3219 billion as of mid-May 2020, which increased to Rs 3294 billion within a month.

Of late, banks have been lowering the rate of interest to attract more customers. Since mid-June, banks have been charging interest in single digit after lowering the rate of interest by 2 percentage points. They have also announced a scheme to provide relief to the Covid-19 affected individuals and institutions. Despite such steps, there hasn’t been any encouraging development in flow of loans.

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