A bank branch for every 20,500 individuals

KATHMANDU, JUL 15 -

Intense competition among commercial banks may have hit their profits, but their expansion drive has benefitted consumers.

Banks’ efforts to reach out to semi-urban and rural areas have increased the people’s access to formal banking, according to the Economic Survey 2011-12.

There has been a significant improvement in the ratio of population to bank branches. As of mid-April 2012, there is one bank branch for every 20,500 people — an improvement from last year’s a branch per 23,960 people.

In the first eight months of the fiscal year, banks added 189 new branches. This addition took the total number of bank branches to 1,300 until the eighth month, compared to 1,111 at the end of 2010-11. If branches of A, B and C class BFIs are taken into account combined, people’s access to banking has further improved. A BFI branch served 11,766 people as of the eighth month.

According to Nepal Rastra Bank (NRB) officials, the central bank’s policy to increase the banking outreach has done wonders when it comes to expanding people’s access to formal financial sector.

“NRB’s directive, which requires BFIs to open a branch in a predefined rural district and one outside the Kathmandu valley in order to open a branch inside the valley, played a crucial role in increasing the outreach,” said Bhaskar Mani Gnawali, spokesperson for NRB. “The central bank also provides interest-free loan worth Rs 5 million for six months to BFIs willing to open branches in 30 predefined districts. This incentive also worked well.”

Along with the growth in banking outreach, there has been a notable growth in banks’ deposit collection. Over the review period, deposit mobilisation of commercial bank increased by 13.6 percent compared to 2.1 percent in the corresponding period last year.  Total deposit collection of commercial banks in the first eight months reached Rs 772.5 billion — up Rs 92.3 billion compared to Rs 680.2 billion at the end of 2010-11. Similarly, average individual deposit increased to Rs 29,000 from Rs 25,500.

Despite the growth in deposits, banks’ loans and advances was not satisfactory. Lending grew by a mere Rs 54.3 billion to reach Rs 598.2 billion by mid-April from Rs 544.2 billion at the end of last fiscal year. The average of loans and advances to an individual increased to Rs 22,500 from Rs 20,400 at the end of the last fiscal year.

The surge in deposit collection without a proportionate growth in lending has resulted in excess liquidity in commercial banks. The credit-to-deposit ratio has decreased and a majority of banks are witnessing decline in their profits. Bankers blamed political instability, poor business environment and acute energy shortage, among others, for the slump in credit demand.

 

Source: http://www.ekantipur.com/2012/07/15/business/a-bank-branch-for-every-20500-individuals/357180/