Loans are cheaper than ever. Borrowers are still holding back
Summary
Nepal's weighted average lending rate has dropped to a historic low of 6.90%, but borrowers remain cautious as the economy faces excess liquidity and subdued credit demand.
Key Points
- Nepal's weighted average lending rate has fallen to a record low of 6.90 percent as of mid-March 2024.
- Despite low borrowing costs, credit growth remains sluggish due to weak aggregate demand and borrower hesitancy.
- Nepal's banking system is experiencing excess liquidity with banks holding about Rs1.25 trillion in surplus funds.
- Economists suggest the economy is in a liquidity trap, with calls for proactive fiscal policy to stimulate demand and credit expansion.
