KATHMANDU — Nepal’s banks and financial institutions are reporting slow overall credit growth, but personal home loans are rising at a strong pace.
According to Nepal Rastra Bank, policy support, higher loan limits, and lower interest rates have pushed home‑loan demand higher in the current fiscal year. While banks hold about NPR 1.2 trillion in idle lendable funds due to weak credit demand, personal housing loans continue to expand.
The central bank’s data shows that by mid‑December of fiscal year 2082/83, banks had issued NPR 27.34 billion in personal home loans of up to NPR 20 million. During the same period last year, lending in this category stood at only NPR 11.13 billion. The figures show that home‑loan lending more than doubled in one year.
Personal housing loans totaled NPR 387 billion in mid‑June 2081 and rose to NPR 398 billion by mid‑December 2081. The amount crossed NPR 417 billion by mid‑June 2082 and reached NPR 444 billion by mid‑December 2082.
During the first five months of the current fiscal year, total private‑sector credit grew by 1.9 percent, or NPR 102.24 billion. In the same period, personal home loans grew by 6.5 percent. Last year, the growth rate for home loans during this period was 2.9 percent.
By mid‑December, outstanding personal home loans reached NPR 444 billion, up from about NPR 398 billion at the end of the previous fiscal year.
To support home‑loan growth, the central bank raised the personal housing loan limit from NPR 20 million to NPR 30 million in this year’s monetary policy. It also set the loan‑to‑value (LTV) ratio at 80 percent for first‑time home purchases or construction up to NPR 30 million.
Bankers say the central bank’s policy easing and the lower risk profile of personal home loans have encouraged lending in this segment. With weak demand for large corporate loans, banks are focusing on small and mid‑sized home loans for borrowers with steady income.
Corporate loan demand remains low, so installment‑based home loans for salaried borrowers have increased. These loans carry lower risk, and the central bank’s policy support has helped lift demand.
Falling interest rates have also played a major role. In mid‑December 2082, the average base rate of commercial banks dropped to 5.38 percent, while the average lending rate fell to 8.90 percent.
Banks add a premium of 1 to 5 percent on the base rate. Under current rate structures, variable‑rate home loans are around 5 percent, while fixed‑rate plans are near 10 percent.
By loan type, hire‑purchase loans grew by 6.1 percent, margin loans by 5.7 percent, and real‑estate loans — including personal residential loans — by 3.7 percent by mid‑December. Cash‑credit loans rose by 2.6 percent, term loans by 1.2 percent, demand and working‑capital loans by 1 percent, and trust‑receipt (import) loans by 0.9 percent. Overdraft loans fell by 5.4 percent.
Central bank officials say that although overall credit expansion remains below expectations, residential home loans have helped keep the banking system active. They expect demand for personal home loans to remain steady as long as monetary conditions and interest rates stay supportive.
