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With the country grappling with the economic slowdown, the insurance industry has taken a significant hit in the current fiscal year. Both life and non-life insurance businesses experienced single-digit growth in the fiscal year 2022/23.

After experiencing double-digit growth in previous years, the insurance sector (both life and non-life) saw a meager increase of 2.85 percent in 2022/23, which is significantly lower compared to the robust growth of 16.48 percent witnessed in 2021/22.

The preliminary data unveiled by the Nepal Insurance Authority shows that life and nonlife insurers collected insurance premiums totaling Rs 182.88bn in the last FY. In 2021/22, the total premium collection stood at Rs 177.81bn.

The business of life insurance companies surged by 2.64 percent in the last fiscal year while non-life insurance companies saw their business grow by 3.6 percent. 

According to NIA, life insurance companies collected premiums amounting to Rs 142.31 in the last fiscal year, while it was Rs 40.57bn for non-life insurance companies. The premium collection of life insurance companies in 2021/22 stood at Rs 138.64bn and non-life insurance companies at Rs 39.17bn.

Insurance sector experts have termed the growth rate of the non-life insurance business as not encouraging. The growth rate of the non-life insurance business was high in the last few years. “The non-life insurance business has been affected this year due to the economic recession and high prices,”  said an official of the Nepal Insurance Authority.

Among the non-life insurance companies, Shikhar Insurance tops the chart when it comes to premium collection in this fiscal. The company collected Rs 5.52bn in insurance premiums till mid-July 2023. 

Sagarmatha Lumbini Insurance is in the second position with a premium collection worth Rs 4.55bn and Siddhartha Premier Insurance is in the third position with a premium collection of Rs 4.51bn. 

The insurance sector faced significant pressure last year due to various factors, including the economic slowdown, and reduced credit flow from banks and financial institutions. As a result of the sharp decline in public savings capacity, the conducive environment for long-term investment in life insurance could not be sustained throughout the year.

However, the opening of imports of luxury goods, including vehicles, enabled the expansion of business for non-life insurance companies in the second half of the last fiscal year.

Insurers say that the rise in the non-renewal and surrendering of insurance policies has dragged the business down in the last fiscal year.

With Nepal Rastra Bank adopting tighter monetary policy along with a slowdown in loan demand, the commercial banks’ lending grew by a marginal 3.42 percent in the last fiscal year. 

The commercial banks that experienced a liquidity crunch in the first half of the FY 2022/23 saw problems of non-disbursement of loans in the second half of the last fiscal. Bankers said demands for loans have remained low throughout the last fiscal. 

While the NRB had targeted private sector credit growth to 12.6 percent in 2022/23, the actual credit growth remained much lesser than the target. In fact, the credit expansion to the private sector in 2022/23 was far less than what the banks lent in 2021/22. The banks’ lending grew by 3.42 percent in 2022/23 compared to 12.2 percent in 2021/22.

According to bankers, the private sector has not sought bank loans with the deepening economic downturn. On the other hand, retail loans such as housing loans and auto loans did not grow due to higher interest rates. While the BFIs gradually lowered the loan interest rates, the demand for loans did not surge as expected.

According to the data of the Nepal Bankers Association (NBA), commercial banks disbursed loans amounting to Rs 144bn in 2022/23 whereas such loan disbursement in 2021/22 stood at Rs 454bn. The total lending of banks by the end of the last fiscal year stood at Rs 4,318bn. 

“The demands for loans have remained subdued due to the state of the economy and businesses,” said Sudesh Khaling, CEO of Everest Bank, “In the initial months of the last fiscal, credit flow could not increase due to a lack of liquidity in the banking system. Later, when the liquidity situation improved, there was no demand for loans.”

Bankers say the other reason behind the sluggish lending is banks have become more cautious in loan disbursement due to a sharp rise in non-performing loans (NPLs).

According to the private sector, the high-interest rates also contributed to lower demand for loans. The private sector has been demanding that interest rates need to be lowered arguing that the average interest rate of loans remained higher that previous years. 

Deposits of commercial banks increased by 12 percent in 2022/23. The banks’ deposits stood at Rs 5,086bn in mid-July 2023 from Rs 4,541bn in mid-July 2022. The banks’ deposits increased by Rs 545bn in the last fiscal.   

After going through a liquidity crunch in the first half, the banking system was flushed with excess liquidity by the end of the last fiscal. With demands for loans drying up, investable capital piled up in the banking system in the last few months of 2022/23. 

With lesser demand for loans, the CD ratio of commercial banks came down to 82.10 percent in mid-July 2023, which was 88.07 percent in mid-July 2022. As per central bank regulatory norms, banks can disburse 90 percent of their deposits in loans. Banks have to maintain the credit-to-deposit ratio (CD ratio) at 90 percent. 

The price of gold has increased by Rs 800 per tola in the domestic market on Thursday.

According to the Federation of Nepal Gold and Silver Dealers’ Association, the precious yellow metal is being traded at Rs 113, 500 per tola today. It was traded at Rs 112, 700 per tola on Wednesday.

Meanwhile, tejabi gold is being traded at Rs 112, 950 per tola. It was traded at Rs 112, 150 per tola.

Similarly, the price of silver has increased by Rs 35 and is being traded at Rs 1, 490 per tola today.  

The Nepal Stock Exchange (NEPSE) plunged by 8. 11 points to close at 2,156.20 points on Wednesday.

Similarly, the sensitive index dropped by 2. 05 points to close at 409. 11 points.

A total of 7,399,474-unit shares of 260 companies were traded for Rs 2. 43 billion.

Meanwhile, Kisan Lagubitta Bittiya Sanstha Limited was the top gainer today with their price surging by 6. 96 percent.

Likewise, Jalpa Samudayik Laghubitta Bittiya Sanstha Limited was the top loser with its price dropping by 6. 49 percent.

At the end of the day, the total market capitalization stood at Rs 3. 16 trillion.