Of the 22 commercial banks, only five banks have extended credit to the agriculture sector beyond the minimum threshold by mid-January 2023. Similarly, the extension of credit of only three banks is above the threshold in the energy sector and four banks' credit is above the threshold in the MCSMI sector.
As per NRB guidelines, the banks have to extend at least 13 percent of their total loans to the agricultural sector, 7 percent to the energy sector, and 12 percent to the MCSMI sector. In total, banks have to extend 32 percent of their total loans to these priority sectors by the end of the current fiscal year. The central bank statistics show banks' credit disbursement to the agriculture sector is as per the NRB's threshold while that to the energy sector is close to the threshold. However, credit disbursement to the MCSMI sector is well below the threshold. Bankers admit that it is a challenge to provide loans to the MCSMI sector as per the NRB threshold by the end of this fiscal year. While the prolonged liquidity crunch has hit the banks' credit expansion this fiscal, the MCSMI are also hard hit by the rising price and slowdown in market demand, say bankers. According to them, it will be a tough task to increase credit flow to the MCSMI sector in the current macroeconomic environment. As of mid-January, 2023, only Agricultural Development Bank Limited, Himalayan Bank, Nepal SBI Bank, Standard Chartered Bank Nepal, and Sunrise Bank have their credit disbursement to the agriculture sector above the NRB threshold. In the energy sector, NMB Bank, Sunrise Bank and Sanima Bank have credit disbursement above the NRB threshold of 7 percent. Similarly, four banks - Agriculture Development Bank, Rastriya Banijya Bank, Kumari Bank and NIC Asia Bank have credit disbursement above the threshold of 12 percent in the MCSMI sector. The state-owned banks fare better than private sector banks when it comes to priority sector lending. Among the commercial banks, Agriculture Development Bank's disbursement to the priority sectors is the highest. The bank has disbursed 57.50 percent of its total loans to the priority sectors. The ADBL has disbursed 28.35 percent of loans to the agriculture sector, 4.79 percent to the energy sector, and 24.36 percent to the MCSMI sector in this fiscal. Similarly, the lending of another state-owned bank - Rastriya Banijya Bank (RBB) to priority sectors stood at 36.98 percent. RBB has 12.16 percent of its total loans to the agriculture sector, 6.89 percent to the energy sector, and 17.93 percent to the MCSMI sector. Among the private sector banks, NMB Bank is ahead of others when it comes to lending to the priority sectors. The bank has 32.90 percent of its total loans to the priority sector. NMB Bank has disbursed 12.74 percent of its total loans to the agricultural sector, 8.94 percent to the energy sector, and 11.22 percent to the MCSMI sector.
