Banking services still centered around capital city
The services of bank and financial institutions (BFIs) are still largely concentrated in and around the capital city though the country has moved toward a federal set-up.
According to Economic Activities Study Report of Nepal Rastra Bank (NRB) of Fiscal Year 2016/17, the share of deposit mobilization and credit disbursement of BFIs in Kathmandu region stood at 68.3 percent and 51.7 percent respectively. The study of the central bank covered 57 districts across the country.
According to the study report, the share of Kathmandu in deposit collection of BFIs remained unchanged in the last fiscal year compared to the previous fiscal year. The share of loans of Kathmandu has however down slightly in the last fiscal year from 53 percent of the previous Fiscal Year 2015/16.
Kathmandu region in the study of the central bank includes Kathmandu, Lalitpur, Bhaktapur, Kavre, Dhading, Nuwakot, Sindhupalchowk, Rasuwa, and Dolakha.
However, the central bank is hopeful that the financial access of public from rural areas will gradually increase due to the use of innovative banking technologies in recent times and its policy interventions toward pushing BFIs in unbanked areas.
There are also challenges in the expansion of banking services to rural areas, according to the NRB report. Due to difficult geographic terrain, many banks’ expansion drive is limited to the district headquarters which has compelled people of remote areas to travel a long distance to get banking services, the report adds.
Ensuring necessary infrastructure and security to banks to reach unbanked areas is another challenge that the central bank has mentioned in the study report.
There is a challenge of inculcating the saving habit among the people of rural areas and channelize such financial resources into agriculture and promotion of small and cottage industries of same areas through the expansion of modern banking services in remote areas, read the report.
Meanwhile, the NRB also said that the deposit growth rate in the financial sector is likely to be hit due to a slowdown in remittance growth rate. Remittance has become one of the major sources of deposits in BFIs.
The banking industry has been facing a shortage of lendable fund since the start of the last fiscal year due to a slowdown in deposit growth and rise in loan disbursement.
However, the rise in government expenditures after the formation of local governments in the new federal set-up is likely to pump more cash into the banking system, according to the study report.
Source: My Republica