Current monetary situation released based on the first three month's data of 2009/10 have warned that a huge level of investment of banks and finance companies into the real estate sector can lead to financial crisis. The growth in commericial banks'credit flow to production sector in three month review period of first fiscal year is lower than that of the corresponding period. Nepal Rastra Bank executive director Trilochan Pangeni said that the central bank cannot stop the investment because it is as per existing laws. He, however, warned that banks and finance companies will be in crisis, if real estate collapses. Nepali banks and finance companies have invested billions of rupees approximately Rs 50 billion in the real estate sector. In the review period, the liquid fund of commercial banks has declined by 19.0 percent, commercial banks' balance held with the NRB decreased by Rs. 16.99 billion, and their balance held abroad decreased by Rs. 5.49 billion in the review period. The higher growth in loan and advances relative to resource mobilization contributed such a decline in the liquid fund. Statistic of Nepal Rastra Bank shows more than dozen of banks and finance companies have invested more than 38 percent in the real estate sector. Real estate business in Kathmandu Valley and the Terai has boomed up to 300 percent since 2007.
1Ropani.com