Setoral

Banking business pretty much depends on matters related to the economic situation of a country, functioning of government, political environment, national and international incidents, etc. The Nepalese banking sector also witnessed a downward trend during the first quarter of the current financial year. Total deposit of the banking sector went down significantly, fees and commissions based business decreased and profit took a downward turn compared to the first quarter of the last financial year. However, the loans and advances portfolio has remained somewhat constant. This is due to the fact that the credit to deposit ratio of the banks has slightly increased.

Frequent ‘bandhs’ called by various political parties has really caused a long term negative impact on our tourism industry, business, and other core sectors. Likewise, political uncertainty and lack of seriousness on the part of the government towards economic development has, in fact, slowed down the pace of economic growth. In this stagnant situation, neither any productive sector can thrive nor people get any opportunity for employment. The insecure situation has also affected the flow of foreign capital into the kingdom.

Tourism, being one of the core sectors of our country, has not been able to recover due to a series of repulsive incidents. Frequent bandhs the Royal Palace incident and its aftermath, terrorist attack in America, and then the present deteriorating political situation and sense of insecurity has almost ruined this sector. Hotels are empty, and so are the mushrooming airlines. Travel, freight, courier agencies, restaurants, and a number of institutions supplying essential ingredients to the tourism sector have also been severely affected.

Recent strikes on in the World Trade Center and the Pentagon, and subsequent action taken by the United States of America on the terrorists and the Taliban regime of Afghanistan has affected the world economy as a whole. The movement of export and import, and even people, has reduced significantly the world over. Nepal is not an exception. Both its export and import has gone down during the first quarter of the present financial year. The export of core items such as Pashmina and ready-made garments has gone down sharply, whereas the export of carpets has also dropped compared to previous quarters.

Industries and business houses have been discouraged to invest further due to recent Maoist attacks on their industrial and business establishments. Similarly, because of the shrinking market of ready-made garments, Pashmina, and carpet in the world market, the entrepreneurs have been facing a lot of problem as to how they can survive and in which area should they step-in in the future. The ghee, copper wire, zinc oxide and other industries having market in India have also been affected due to the recent policy of Indian state and union governments. The Trade and Transit Treaty between Nepal and India is yet to be signed as it has been extended for another three months. The business and industrial community is keenly watching the development in this area.

The meager aid absorptive capacity of the government and its retarding development initiative has compelled the construction sector of the country to suffer a lot. Once a very productive and progressing sector, today the construction sector is witnessing very unhealthy competition among each other because of lack of work.

The banking sector, which depends on all the above players, is watching the situation like a lame duck expecting, speedy recovery. Even a rumour can affect the functioning of a bank. Recently some newspapers published the so-called expression of an opposition leader regarding the limiting of amount for deposit in banks. Frightened by the news, a large number of account holders withdrew significant amount of money from the banks and even took it out of the country.

The financial results of most of the commercial banks have shown that it will be very difficult for them to earn even the same amount of profit that they earned in FY 2057/58. Their profit might go down to some extent. Due to the miserable state of different economic sectors of the country, the banking sector will not be able to attract much business in the immediate future. This fully depends on the national and international situation.

The only optimistic approach is that this state of chaos and mess will not remain for long and both the world and Nepalese economy will soon gather momentum. At the same time, the banking sector will have to concentrate more on new areas of banking business and try to curtail unnecessary expenses. The Bankers’ Association can play a significant role in identifying the areas where the Nepalese banks can work together. If things go smoothly in future, then the banking sector will surely be able to recover from the recessionary condition that it had to face during the first quarter of the current financial year.

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Banking Sector Predicting Gloomy Days Ahead