Kathmandu, August 3 Commercial banks extended average credit of Rs 1.6 billion per day in the first two weeks of fiscal year 2016-17, signalling rapid growth in demand for loans since the beginning of the new financial year on July 16. Commercial banks had issued an average of Rs 778.7 million in loans per day in the last fiscal year. Due to surge in demand for loans, the credit portfolio of 28 commercial banks present in the country grew by Rs 23 billion in between July 16 and 29, shows the latest report of the Nepal Bankers’ Association (NBA). With this, the total credit portfolio of banks stood at Rs 1,409 billion as of July 29. “Credit portfolio has expanded as banks’ exposure towards real estate and stock market has gone up,” Himalayan Bank CEO Ashoke Rana told The Himalayan Times. Although latest data on disbursement of loans towards unproductive sectors, such as real estate and stock market, are not available, exposure of commercial banks to these areas had gone up by 22.9 per cent and 57.8 per cent, respectively, as of third quarter of fiscal 2015-16 that ended in mid-April. Despite this growth, the share of real estate credit, including home loans, stood at 13.8 per cent of the total credit portfolio during that period, which was way below the regulatory requirement of 25 per cent. Also, the share of loans extended to stock investors hovered around two per cent of the total credit portfolio. But bankers like Rana expect banks’ exposure towards these sectors to go up in the coming days. “This is because commercial banks have already started increasing capital to meet the new minimum regulatory paid-up capital requirement of Rs eight billion — which is four times more than the existing requirement — within the deadline of mid-July, 2017,” Rana said. “While capital base of banks is expanding, there are very few investment opportunities in the country, especially in the real sector. So, risk-taking behaviour is likely to go up in the coming days, as banks come under pressure to enhance performance.” NBA President and CEO of NMB Bank Upendra Poudyal also acknowledged that commercial banks’ exposure towards real estate and stock market was going up in recent days. “But that is not the only reason for hike in credit demand,” he said. “Credit demand goes up in the first few days of every new fiscal year because banks reduce loan processing works towards end of financial years.” Banks do this because they have to provision one per cent of the credit while issuing loans, which tends to reduce their profitability. “So, banks wait for the new fiscal year to issue fresh loans,” Poudyal said. “Also, Dashain, the biggest festival of Hindus, is arriving. And traders have started placing orders to import goods to meet the higher consumer demand. This has also raised demand for loans.” While credit demand remained high in the first two weeks of the fiscal year, deposit inflow at commercial banks also did not taper during that period. In between July 16 and 29, banks collected Rs 35 billion in deposits. This means banks saw average inflow of Rs 2.5 billion in deposits per day in the two-week period. Average per day deposit inflow stood at Rs 803.3 million in the last fiscal year. As credit outflow and deposit inflow grew in tandem, loanable fund of commercial banks currently hovers around Rs 58 billion. This means banks can immediately provide this amount as credit to borrowers. The portion of loanable fund stood at around Rs 55 billion at the start of the fiscal year on July 16.