Financial Sector Performance Review Report. March 2018

Transcription

1 Financial Sector Performance Review Report March 2018 This report presents the performance of the Bhutanese financial sector on peer group basis (excluding NPPF) for the period ended Q1FY 18 in comparison to the previous year s corresponding quarter. This report has been prepared by the Financial Regulation & Supervision Department of the Royal Monetary Authority of Bhutan (RMA) and the information contained in this report is based on the returns submitted by the financial institutions to the RMA. FINANCIAL REGULATION & SUPERVISION DEPARTMENT 1 Financial Regulation and Supervision Department

2 Overview The overall soundness of the financial sector remains satisfactory in March The Capital Adequacy Ratio (CAR) has increased to 14.54%, which is maintained well above the minimum regulatory requirement of 12.5% (including the capital conservation buffer). On the other hand, the NPLs to loan ratio has reached to 14.63%. With regard to the earnings of the financial sector, it has reduced largely due to increase in NPL and subsequent increase in the provision which ultimately affected the earning. Both banking and nonbanking incurred loss in March The asset base of the banking sector has expanded by 9.46%, owing to 13.52% growth in loans (net of specific provision and interest in suspense). Financial sectors total loans to the economy have increased by 15.63%, from Nu billion in March 2017 to Nu billion in March In terms of lending by sectors, Housing sector has the highest loan with Nu billion (22.86%) followed by Service and Tourism sector with Nu.23.99billion (22.55%) and Trade and Commerce sector with Nu.14.85billion (13.96%).Gross NPL ratio of banks and non-bank stood at 13.27% and 20.65% respectively. Capital Indicators Mar-17 Dec-17 Mar-18 RWCAR(12.5%) 17.84% 16.02% 14.54% Core CAR(7.5%) 15.06% 13.31% 11.83% Leverage Ratio(5%) 11.65% 9.78% 9.01% Asset Quality Gross NPL Ratio 12.38% 7.98% 14.63% Net NPL to Net Loan 5.46% 1.40% 6.06% Single Largest Borrower 14.61% 15.49% 14.67% Provision to NPL 49.32% 70.58% 52.49% Ten Largest Borrower 16.82% 15.20% 15.35% NPL Nu.11.39b Nu.8.24b Nu.15.56b Loan Nu.91.99b Nu b Nu b Earning Return on Asset(ROA) -0.61% 0.67% -0.89% Return on Equity(ROE) -3.85% 4.80% -6.65% Profit After Tax( in million) Nu Nu Nu.-1, Liquidity 22.44% (Nu.23.87billion) followed by large enterprises and Small enterprise with 14.75% (Nu.15.69billion) and 11.35%(Nu.12.07billion) respectively. The loan to micro and cottage enterprises comprised of only 5.83 % (Nu.6.20billion) of the total loans. Deposit liabilities witnessed a growth of 19.10% during the period under review. Statutory Liquidity Requirement (SLR) were also maintained above the minimum regulatory requirements. Highlights of the financial institutions( Financial sector Indicators) Loans to Deposits ratio 77.20% 77.02% 75.82% Statutory Liquidity Requirement 31.24% 27.37% 29.92% liquidity Position(Nu. In billion) Nu Nu Nu Statutory Liquidity Requirement(in Nu.billion) Nu Nu,25.43 Nu Of the total loans of Nu billion in the financial sector, the share of loan to medium enterprises constituted of 2 Financial Regulation and Supervision Department

3 1. Assets/ Liabilities of financial sector The assets of the financial sector have expanded by 9.46% slightly lower than the 11.42% growth recorded in March Total asset of the financial sector amounted to Nu billion in March 2018 as compared to Nu billion in March 2017, registering a growth of Nu.13.76billion. Around 61% of the expansion in total assets has been contributed by loans (net of specific provision and interest in suspense). In terms of asset composition, 86.50% of the total assets are held by banks and the remaining 13.50% by the non-banks. The assets of the banking sector have increased by 9.92%, from Nu billion in March 2017 to Nu billion in March Robust expansion in loans (net of specific provision and interest in suspense) by Nu.10.98billion and investment in marketable securities particularly the RMA T-bills and investment in commercial papers (Nu.2.5billion) has led to the growth of assets of the banking sector. Similarly, the non-banking sector also continued to grow with an increase of its assets by 6.58% (Nu.1.33billion). The total assets increased from Nu billion in March 2017 to Nu.21.49billion in March The increase in asset size was mainly due to ASSET Mar-17 Mar-18 Cash and bank balances 39, , Marketable securities Loans and advances( net of provisions) Equity Investment 16, , , , Fixed Asset 1, , Other Assets 2, , Total 145, , Liabilities Mar-17 Mar-18 Paid up capital 8, , Reserves 12, , Deposit Liabilities Bonds& borrowing Interest Provision Insurance Fund Other liabilities 96, , , , , , , , , Total 145, , Financial Regulation and Supervision Department

4 Financial Sector Performance Review Report the increase in loans (net of specific provision and interest in suspense) and also due to increase in cash and bank balances. to Nu.19.23billion, as compared to Nu billion in March 2017, indicating a decrease of Nu.2.82billion. The capital fund of banking sector amounted to Nu billion and for non- banking sector, it amounted to Nu.2.95billion during the period under review. On the liability side, substantial growth in deposits by Nu.18.37billion was the major reason for the increase in liabilities of the financial sector. Around 83% of the banking sector consist of deposit liabilities. Likewise, the major component of non-banking sector is the insurance fund with 53% followed by bonds and borrowing of 20%. As of March 2018, the non-banking sector had an Insurance Fund of Nu.11.49billion which comprises of the Life Insurance Fund, General Insurance Fund, Group Insurance Fund and other funds. 2.1 Capital Adequacy Risk Weighted Capital Adequacy Ratio (RWCAR) of the financial sector for March 2018 stood at 14.54% as compared to 17.84% in March 2017 showing an decrease of 3.3% (illustration I). The downtick in CAR is primarily on account of increase in total Risk Weighted Assets (RWA by 140, Capital fund1 of the financial sector for the period ended amounted 1 In this case, the capital fund is the total capital fund without deducting the NPL of related party. The total capital fund and the capital fund for calculating 4 Nu. In million 2. Capital and Reserves Capital is the main source of financial support and act as a buffer that enables financial institutions to absorb a level of losses without the interest of creditors and depositors being adversely affected, and thus protects the interest of the creditors and depositor in the event of liquidation. Besides absorbing the unanticipated shocks, it also signals that the institution will continue to honor its obligations. illustration I: Capital Adequacy 120, % 100, % 80, % 11.83% 60, , , capital Fund Mar-17 Mar-18 21, , Tier 1 18, , Risk weighted Asset 120, , CAR(%) 17.84% 14.54% Core capital (%) 15.06% 11.83% 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Nu.11.3billion). The analysis of components reveals that the expansion in RWAs has been exclusively contributed the CAR ratio will not tally since the NPL of related party has been deducted from the capital fund while assessing the RWCAR as required by the section PR Financial Regulation and Supervision Department

5 by credit RWAs which was brought about by the increase in NPL by Nu.4.17billion whereby a high risk weight of 150% was assigned. Additionally, the decrease in the capital fund of Nu.2.33billion has also resulted to decrease in the RWCAR ratio. Core capital ratio 2 of the financial sector has also decreased from 15.06% in March 2017 to 11.83% in March Banking sector and Non-banking sector The RWCAR 3 of the both the banking Sector and non-banking sector has decreased by 3.06% and 4.35% respectively. The increase in the risk weighted asset has led to the decrease in the ratio. For March 2018, the RWCAR of banking sector stood at 15.09% while for non-banks, the ratio stood at 12.08%. The core capital of banks stood at 12.26% and 9.94% for non-banking sector during the period under review. 2.3 Leverage Ratio Leverage ratio acts as a supplementary measure to capital adequacy ratio by ensuring that the financial institutions maintain adequate levels of capital at all times. The Leverage ratio for the financial sector for the period ended March 2018 stood at 9.01%, maintaining 4.01% higher than the regulatory requirement of 5%. The Leverage ratio of Banking and non-banking sector stood at 8.75% and 10.73% respectively. 3. Asset Quality Analysis on the loan classification of the financial sector indicated that both loans and NPL have increased by Nu billion and Nu billion respectively. Financial sectors total loans to the economy amounted Nu billion in March 2018 while the NPL of the financial sector amounted to Nu.15.56billion. Gross NPL ratio (NPL to total loans) of the financial sector slightly increased to 14.63% in March 2018 as compared to 12.38% in previous year s corresponding year. However, when compared to December 2017, the gross NPL ratio has almost doubled reaching at 14.63% from 7.98% in With effect from September 2016, financial institutions are required to maintain a minimum core capital of 7.5%., including a capital conservation buffer of 2.5% from Tier 1 capital. 3 The RWCAR signifies the availability of capitalto support the business of the financial institutions. The NPL of related parties has been deducted from the capital fund when assessing RWCAR. 5 Financial Regulation and Supervision Department

6 Financial Sector Performance Review Report category6 with 10.88%(Nu.1.69 billion) respectively 25.00% 20.65% 15.00% 15.80% 10.00% Loans and advances of the financial sector increased by Nu billion during the period under review. Relatively higher loans have been disbursed to Housing sector, Service and Tourism sector and Trade and Commerce sector. 5.00% Mar-18 Mar-17 Banks Mar % Non Banks 65, , , NPL 8, , , , Total Loan 74, , , , % 13.27% 15.80% 20.65% 15, The sector-wise analysis reveals that out of the total loans of Nu billion, Housing sector has the highest loan with Nu billion (22.86%) followed by Service and Tourism sector with Nu.23.99billion (22.55%) and Trade and Commerce sector with Nu.14.85billion (13.96%). Gross NPL ratio of banking sector has increased by 1.71%, from 11.57% to 13.27% during the period under review. Likewise, the NPL ratio of non-banking sector has increased by 4.8%, from 15.80% in March 2017 to 20.65% in March , , , % 12.54% 13.96% 11.86% 0.14% 1.64% 1.52% 0.86% 0.45% 0.83% 5.00% % Sectoral Loan % Loan Exposure 4 The loans and advances whose principal and interest payment has been overdue by 91 days to 180 days 5 principal and interest overdue above 365 days has been categorized into loss bucket % 10.00% 5.61% 10, % 5, % 22.86% 22.55% 25, in million Nu During March 2018, out of the total NPL of Nu billion, NPL classified under the substandard category4 comprised of 45.35% amounting to Nu.7.06billion followed by the Loss category5 (which includes the term expired loans and loans under litigation cases) with 43.78% amounting to Nu.6.81billion and Doubtful Illustration iii: Sectoral Loan March The loans and advances whose principal and interest payment has been overdue by 181days to 365days has been included under doubtful category Financial Regulation and Supervision Department in percentage 13.27% Perfoming Loan Gross NPL Ratio 3. Sectoral Loans and Advances 20.00% In Percent in million Nu. illustration II: NPL Ratio of banking and non-banking sector 100, , , , , , , % 30, , , Mar-17

7 In terms of absolute increase in loans for the period ended March 2018, the loans to Service and Tourism sector experienced the highest sectoral increase by Nu.5.75 billion followed by loans to Housing sector by Nu.3.46billion and Transport by Nu.1.27 billion. From the total loan outstanding of Nu billion for the period ended March 2018, 81.63% (Nu.86.84billion) comprises of loans provided by the banking sector and remaining 18.37% (Nu billion) comprises of loans provided by non-banking sector. The loan for both the banking and nonbanking sector has increased by Nu.12.60billion and Nu.1.78 billion respectively. The analysis of the loan portfolio for March 2018 shows that the banking system is dominantly exposed toward Housing sector with 24.50% (Nu.21.27billion) and Service/Tourism sector with 20.72% (17.99billion).Next by size are the portfolios of Production and Manufacturing sector with 12.78% (Nu.11.09billion) and Trade/Commerce Sector with 12.56%(Nu.10.91billion) - (illustration iv). For non-banking sector, the highest loan was seen in Service and Tourism sector with 30.72% amounting to Nu.6 billion, followed by Trade and Commerce sector and Housing sector with 20.20%(Nu.3.95billion) and 15.61%(Nu.3.05billion) respectively. illustration iv: Loan exposure of banking sector (March 2018) Trade, 12.56% Service/Tourism, 20.72% Housing, 24.50% Production and Manufacturing, 12.78% Personal Loan, 11.68% Agriculture, 6.32% Others, 0.87% Transport, 5.52% illustration v:loan exposure of Non-Banking sector ( March 2018) Transport, 6.00% Personal Loan, 12.66% Housing, 15.61% Trade/Commerce, 20.20% Production and Manufacturing, 11.51% Service/Tourism, 30.72% Loan to FI(s), 0.18% Staff Loan, 1.48% Edu Loan, 1.81% LAFD, 1.06% Loans to Government, 0.55% Others, 0.67% Education Loan, 0.26% Staff Loan, 2.33% Agriculture/Animal Husbandry, 0.04% 7 Financial Regulation and Supervision Department

8 Financial Sector Performance Review Report 4, , % 3, , , % 2, , % 1, illustration vi: Sectoral NPL March % 20.00% 16.72% 5.86% 15.00% 8.56% 10.00% 0.39% 0.26% 0.11% 0.00% 0.75% 5.00% 0.00% 0.00% -5.00% Sectoral Loan % Loan Exposure Illustration Vii :NPL exposure of banking sector (March 2018) Trade, 24.80% Housing, 16.59% Loan to FI(s), 0.00% Transport, 5.46% Service/Tourism, 19.79% The analysis on the sectoral exposure to total NPL of the financial sector for March 2018Trade/Commerce (24.77%), Service/Tourism (22.52%) and Housing sector (16.72%) accounted for the highest value of nonperforming loans by registering total NPL exposure of 64.01%. This was mainly due to the renewal of OD loans which is usually done towards the year end % 24.77% in percentage Asset quality has deteriorated with the increase in NPL from Nu.11.39billion in March 2017 to Nu billion in March 2018, indicating an increase of Nu.4.17billion. The NPL of the financial sector has increased by Nu.7.3billion as compared to December The last quarter of the financial year (December 2017) is normally associated with recovery efforts by financial sector and accordingly the NPL is usually observed to be low during the year end. in million Nu 4. Credit Quality/ Sectoral NPL of Financial sector Agriculture, 14.10% Production and Manufacturing, 9.60% Personal Loan, 8.26% Staff Loan, 0.13% Edu Loan, 0.13% LAFD, 0.15% Loans to Government, 0.00% Others, 1.01% illustration Viii: NPL exposure of Non-Banking sector ( March 2018) Production, 9.65% Personal Loan, 9.44% Others, 0.02% Education Loan, 0.63% Transport, 7.00% Staff Loan, 1.13% NPL of banking sector has increased by Nu.2.94billion, from Nu.8.59billion in March 2017 to Nu.11.53billion in March 2018 against the loan growth of Nu.12.6billion. Housing, 17.11% Trade/Commerce, 24.69% 8 Financial Regulation and Supervision Department Service/Tourism, 30.32% Agriculture/Animal Husbandry, 0.02%

9 In Percent Financial Sector Performance Review Report The main driver for the high level of NPL of banking sector were due to high NPL in Trade/ Commerce sector with 24.80%(Nu.2.86billion). A high level of NPL was also in seen in Service and Tourism sector and Housing sector with 19.79% (Nu.2.28billion) and 16.59% (Nu.1.91billion) respectively (illustration vii) Similar to banking sector, the NPL of nonbanking sector has also increased by Nu.1.23billion, from Nu.2.81 billion in March 2017 to Nu.4.03billion in March Out of total NPL of Nu.4.03billion in March 2018, the highest NPL during the period under review was seen in Service & Tourism with 30.32%(Nu.1.22billion) followed by Trade and Commerce sector with 24.69% (Nu.996million) and Housing with 17.11% (Nu.690million)- illustration viii. 5. Loans and Advances to Micro, Cottage, Small, Medium and Large enterprises (MCSML) illustration ix: % Loan share of MCSML for March % 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% % share from % share from non % share from banks total loan banks total loan total loan LARGE 16.88% 5.24% 14.75% MEDIUM 18.89% 38.23% 22.44% SMALL 9.73% 18.54% 11.35% COTTAGE 2.93% 0.40% 2.47% MIRCO 4.11% 0.06% 3.36% 9 Financial Regulation and Supervision Department MCSML sector contributes significantly towards national GDP, employment generation and export earnings. The diagram (illustration ix) depicts loan exposure to Micro, Cottage, Small, Medium and Large (MCSML) 7 enterprises and loans to the non-enterprise sector 8. As of March 2018, the loans to MCSML amounted to Nu.57.83billion and loan to non-enterprise amounted to Nu.48.54billion. As depicted in the diagram, from the total loans of Nu billion in the financial sector, the share of loan to medium enterprises constitutes of 22.44% (Nu.23.87billion) followed by large enterprises and small enterprise with 14.75%(Nu.15.69billion) and 11.35%(Nu.12.07billion). The loan to micro and cottage enterprises comprised of only 5.83 % (Nu.6.20billion) of the total loans. For the banking sector, the loan to medium enterprises constituted 18.89% (Nu.16.40billion) while loan to large enterprises constituted 16.88%(Nu.14.66billion). The loans to micro, cottage and small enterprises constituted of only 16.77% (Nu.14.56billion) 7 MCSML comprise of Agriculture. Production & Manufacturing, Trade & commerce, Service and Loans to FIs sector. 8 Non Enterprise sector comprise of Housing, Personal, Transport, staff loan, Education loan, Loan against fixed deposits, Loans to Government and others.

10 Similarly, for non-banking sector, loan to medium and small enterprises constituted of 38.23% (Nu. 7.47billion) and 18.54% (Nu.3.62 billion) respectively, while loan to large enterprises constituted 5.24% (Nu. 1.02billion). The loan to micro and cottage enterprise by the non-banking sector has the minimum share of 0.06% (Nu.11.54million) and 0.40% (Nu.78.70million) respectively. The analysis on the loan trend of MCSML and non-enterprise revealed that all the Loans to MCSML and non-enterprise is on increasing trend over the quarters. However, the loans to cottage enterprise has decreased in March 2018 by Nu.624million when compared to December The decrease in the loan to Agriculture and Trade & Commerce Sector by Nu.455million and Nu.106million respectively has contributed towards the decrease in cottage enterprise loan. in Billion (Nu.) % illustration x: MCSML and Non-enterprise trend 4.40% 4.42% -0.52% As seen in the a graph (illustration x), the highest growth (CAGR) over the quarters was seen in the loans to medium enterprise with 4.40% whereas the loan to cottage enterprise showed a decrease of 0.52% over the quarters The loan to MCSML loan has increased to Nu.57.83billion in March 2018 from Nu.49.69billion in March 2017, showing a growth of 16% ( Nu.8.13billion). The growth in the loans to MCSML was mostly attributable to high demand towards the Service/Tourism Sector, Production & Manufacturing sector and Trade& Commerce sector. 3.49% 0.00 MICRO COTTAGE SMALL MEDIUM LARGE NON -Enterp Dec Mar Jun Sep Mar CAGR (%) 3.83% -0.52% 4.42% 4.40% 3.49% 3.65% 3.65% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% -1.00% Sectoral MCSML loans of FIs( March 2018) Sl no Sector MICRO COTTAGE SMALL MEDIUM LARGE in million Nu. Total MCSML loan % Share of total loan OS 1 AGRICULTURE 2, , , % 2 PROD & MANU , , , , % 3 SERVICE , , , , % 4 TRADE & COMM , , , , % 5 LOANS TO FI(s) % TOTAL 3, , , , , , % 10 Financial Regulation and Supervision Department

11 in million Nu. Financial Sector Performance Review Report 6. Access to Finance by Micro Finance Institutions (MFIs) Loan and NPL of MFIs( March 2018) Sl Particulars Total MFIs 1 Total loan Sanctioned Total loan Outstanding Total NPL Total no of loan a/cs 4,200 5 NPL ratio 11.71% With the implementation of regulations for microfinance institutions and agent banking, the RMA so far issued registration certificates to three microfinance institutions and have a total agent banking (BoB) of 212 of March The MFIs currently operate in all 20 Dzongkhags benefiting both the rural and urban clients. Women borrowers constitutes more than 90 % of the total clients of MFIs. As depicted in the above table, as of March 2018, the three MFIs have reached out to 4200 clients sanctioning a loan of Nu million The loan grew by Nu.152million (72%) over the previous year s corresponding quarter. Of the total loan outstanding of Nu million, the NPL of MFIs amounts to Nu million indicating a gross NPL ratio of 11.71% illustration xi:financial Performance of FIs Mar Financial Performance The performance of the financial sector has declined as both the banks and nonbanks has incurred a loss of Nu.812million and Nu.547million respectively during the period under review. The financial sector as a whole has incurred a loss of Nu.1.36 billion. Almost stagnant interest income and increased in interest expense and operating expense explain loss incurred by the financial sector during the reviewed quarter. Most banks have incurred losses in March 2018 that has also led to overall losses in the financial sector Mar-18 Interest Income Interest Expense Accordingly, profitability (before tax) indicators have declined in March 2018; Return on Assets (ROA) stood at 0.89% (-0.61% in March 2017) and Return on Equity (ROE) at -6.65% (-3.85% in March 2017). PAT 11 Financial Regulation and Supervision Department

12 The banking sector has incurred a loss of Nu.812 million in March 2018 as compared to the loss of Nu.863million in the same quarter of previous year. The drastic increase in NPL by Nu.2.94 billion (with majority of it being under loss category) has resulted in assigning a high provision of Nu.1.49billion which ultimately has contributed towards the deterioration of earnings. Other reasons for incurring loss include increase in interest expense (by 8%) and operating expenses (by 11%). Bank wise data reveals that the number of loss making banks has increased to 3 in March Rising cost of operations has compelled these banks to incur losses during the period under review. Non-banking sector has incurred a loss of Nu.547million in March 2018 as compared to the profit of Nu.61.50million in same quarter of previous year. Similar to banking sector, the increase in NPL by Nu.1.23billion has led to high provisioning of Nu.929million as compared to provisioning of only Nu.285million in March This increase in the provisioning has significantly affected the profit of the non- banking sector. Moreover, the increase operating expense by Nu.24.55million (27%) has also led the non-banking sector to incur loss in March Deposit (Banking Sector) On the funding side, deposit base has significantly increased by 19% during Q1FY18 9 against 5.68% in Q1FY17. The total deposit has reached to Nu billion in March 2018 as compared to Nu.96.16billion in March Nu.in million 120, , , , illustration xii: Deposit by Type 40, , Mar-17 Dec-17 Mar-18 Recurring Deposits 1, , , Fixed Deposits 44, , , Savings Deposits 24, , , Current Deposits 25, , , The current account saving account (CASA) deposits have witnessed robust growth during the period under review. The current deposits has increased by 41.79% ( Nu.10.67billion). Similarly, the saving deposit has also increased by 13.52% (by Nu.3.36billion), The Individual and Private companies constituted the highest CASA accounts of Nu billion (88% of the total CASA Deposit). Time Deposits have increased from Nu billion in March 2017 to Nu billion in March 2018 indicating a growth of 9.48%. 12 Financial Regulation and Supervision Department 9 Q1FY2018 refers to quarter 1 financial year 2018

13 As a share of total deposits, Demand Deposits (Current and Saving) accounted for 56.26% and Time Deposits (Fixed and Recurring) accounted for 43.74%. Of the total deposit of Nu billion in March 2018, the Current Deposit accounted for 31.60% while the Saving Deposit accounted for 24.66%. The share of Fixed Deposit accounted for 42.36% and Recurring Deposit accounted for 1.37%. Analysis on the deposit data reveals that customer deposits 10 which comprise 87% of total deposits and are stable in nature have increased by 28% in Q1FY18. On the other hand, Financial Institution( banks and non- banks) deposits have declined by 20%. In terms of deposits by customer - Retail Deposits accounted for Nu.80.49billion and remaining Nu billion comprises of Corporate Deposits. The Retail Deposit (70.28% of total deposits in Q1FY18) have witnessed a growth of 42% while the Corporate Deposit (which consists of 29.72% of total deposit) has decreased by 13.96% (from Nu.39.57billion in March 2017 to Nu.34.04billion in March 2018). Nu.3.56billion is in the form of foreign currency deposits. Similarly, out of the total Corporate Deposits of Nu.34.04billion, deposits by Government Corporation constituted the highest with 28.23% amounting to Nu. 9.61billion followed by the deposits of commercial banks with 22.82% (Nu.7.77billion)- Annexure I Credit to Deposit ratio of the banking sector slightly decreased by 1.38%, from 77.20% in March 2017 to 75.82% in March Liquidity On the liquidity front, the Banks and nonbanks are required to maintain a minimum statutory liquidity ratio in the form of quick assets of 20% and 10% respectively. The overall liquidity position of the financial sector remained comfortable by maintaining liquidity in the form of quick assets in excess of the actual requirement. The quick assets amounted to Nu billion against the minimum requirement of Nu.26.15billion indicating an availability of sufficient buffers to meet most payment obligations. Out of the total Retail Deposits of Nu.80.49billion, individual deposits consists of 95.57%(Nu.76.92billion) and remaining 4.43% amounting to 10 Customer deposit includes all the current, saving, fixed and recurring deposits made by individuals, government, corporations and private & public companies ( other than banking and non-banking financial institutions 13 Financial Regulation and Supervision Department During the period ended March 2018, financial sector has maintained Statutory Liquidity Ratio (SLR) at 29.92%. However, as compared to the previous year s corresponding quarter, SLR position of financial sector has decreased by 1.32% which was due to liabilities primarily the deposits. However, the SLR

14 ratio is still maintained well above the regulatory requirement. SLR position of the banking sector stood at 32.47% in March 2018 as compared to 34.51% in corresponding quarter of previous year. On the other hand, the non-banking sector s SLR position as of March 2018 has slightly increased to 13.27% as compared to 10.25% in March 2018, mainly due to increase in quick asset by Nu.754million. Both the banking and non-banking sector has maintained its requirement of 20% and 10% respectively for the reviewed quarter. In million Nu. 45, , , , , , , , , illustration xiii: Liquidity 40.00% 34.51% 32.47% 31.24% 35.00% 29.92% 30.00% 20.00% 10.25% 13.27% 15.00% 10.00% 5.00% Mar-17 Mar-18 Mar-17 Mar-18 Mar-17 Mar % Banks Non Banks Total FIs Quick Asset 36, , , , , , Liquidity Position 15, , , , SLR(%) 34.51% 32.47% 10.25% 13.27% 31.24% 29.92% 25.00% in percent 14 Financial Regulation and Supervision Department

15 ANNEXURE I Deposit by Customer March ( Nu. in million) Deposits by Customer Mar-17 Total Deposits Mar-18 % change % Holding(March 2018) Corporate deposits 39, , % 29.72% Government 5, , % 3.06% Government Corp. 10, , % 8.39% Public Companies 1, , % 1.55% Private Companies 4, , % 4.10% Commercial Banks 8, , % 6.78% NBFIs 9, , % 5.84% Retail deposits 56, , % 70.28% Individuals 54, , % 67.16% Foreign Currency 2, , % 3.11% Total 96, , % % Consolidated Loan Classification March (Nu. in million) Loans Performing loans Standard Watch (up to 90 days) Non-performing loans Substandard (91 to 180 days) Doubtful (181 to 365 days) Loss (365 days & above) Total Banks NBFIs TOTAL Absolute Mar-17 Mar-18 Mar-17 Mar-18 Mar-17 Mar-18 Change 65, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Financial Regulation and Supervision Department

16 ANNEXURE II SECTORAL LOAN -March (figure in million Nu.) Sector Banks Non-Banks Total Loans % Change Mar-17 Mar-18 Mar-17 Mar-18 Mar-17 Mar-18 % Holding( Agriculture/Animal Husbandry 4, , , , % 5.16% Production and Manufacturing 10, , , , , , % 12.54% Service/Tourism 13, , , , , , % 22.55% Trade/Commerce 9, , , , , , % 13.96% Loan to FI(s) % 0.14% Housing 17, , , , , , % 22.86% Transport 3, , , , , , % 5.61% Personal Loan 9, , , , , , % 11.86% Staff Loan 1, , , , % 1.64% Education Loan , , % 1.52% LAFD 1, , % 0.86% Loans to Government % 0.45% Others % 0.83% March Totals 74, , , , , , % 100% 2018) SECTORAL NPL -March (figure in million Nu.) Banks Non-Banks Total NPLs Sector Mar-17 Mar-18 Mar-17 Mar-18 Mar-17 Mar-18 change 2018) Agriculture/Animal Husbandry , , % Production and Manufacturing 1, , , , % Service/Tourism 1, , , , , % Trade/Commerce 2, , , , % Loan to FI(s) 0.00 (0.00) % Housing 1, , , , % Transport % Personal Loan , , % Staff Loan % Education Loan % LAFD % Loans to Government % Others % Totals NPL 8, , , , , , % Total Loan 74, , , , , , Gross NPL Ratio 11.57% 13.27% 15.80% 20.65% 12.38% 14.63% 16 Financial Regulation and Supervision Department Absolute % Holding( March

17 March 2017 Annexure III Micro, Cottage, Small. Medium, Large (MCSML) and Non enterprise loan for March 2018(in Nu.million Sl no. (1) MICRO (2) COTTAGE Sector % share of each category % share of total outstanding Loan Outstanding NPL % share of each category % share of total outstanding Loan Outstanding NPL % share of % share of total each category outstanding AGRICULTURE 2, % 3.44% % 0.00% 2, % 2.81% PROD & MANU SERVICE TRADE&COMMERCE LOANS TO FIs MICRO TOTAL AGRICULTURE PROD & MANU SERVICE TRADE&COMMERCE LOANS TO FIs COTTAGE TOTAL Loan Outstanding Banks Non Banks Total FIs NPL % 0.06% % 0.00% % 0.05% % 0.10% % 0.02% % 0.09% % 0.51% % 0.04% % 0.42% % 0.00% % 0.00% % 0.00% 3, % 4.11% % 0.06% 3, , % 3.36% 1, % 2.00% % 0.01% 1, % 1.64% % 0.06% % 0.01% % 0.05% % 0.29% % 0.11% % 0.26% % 0.57% % 0.27% % 0.52% % 0.00% % 0.00% % 0.00% 2, % 2.93% % 0.40% 2, % 2.47% AGRICULTURE % 0.66% % 0.01% % 0.54% (3) SMALL PROD & MANU 1, % 1.78% % 1.41% 1, % 1.71% SERVICE 2, % 2.44% 1, % 8.47% 3, , % 3.54% TRADE&COMMERCE 4, , % 4.86% 1, % 8.65% 5, , % 5.55% LOANS TO FIs % 0.00% % 0.00% % 0.00% SMALL TOTAL 8, , % 9.73% 3, % 18.54% 12, , % 11.35% (4) MEDIUM (5)LARGE AGRICULTURE % 0.20% % 0.02% % 0.17% PROD & MANU 3, % 4.14% 1, % 7.13% 4, % 4.69% SERVICE 8, , % 9.53% 3, % 20.30% 12, , % 11.51% TRADE&COMMERCE 4, , % 4.99% 2, % 10.78% 6, , % 6.05% LOANS TO FIs % 0.03% % 0.00% % 0.03% MEDIUM TOTAL 16, , % 18.89% 7, , % 38.23% 23, , % 22.44% AGRICULTURE % 0.00% % 0.00% % 0.00% PROD & MANU 5, % 6.74% % 2.96% 6, % 6.05% SERVICE 7, % 8.36% % 1.82% 7, % 7.16% TRADE&COMMERCE 1, % 1.64% % 0.46% 1, % 1.42% LOANS TO FIs % 0.14% % 0.00% % 0.12% LARGE TOTAL 14, % 16.88% 1, % 5.24% 15, % 14.75% HOUSING 21, , % 24.50% 3, % 15.61% 24, , % 22.86% TRANSPORT 4, % 5.52% 1, % 6.00% 5, % 5.61% PERSONAL 10, % 11.68% 2, % 12.66% 12, , % 11.86% Non-Enterprise STAFF LOAN 1, % 1.48% % 2.33% 1, % 1.64% Education Loan 1, % 1.81% % 0.26% 1, % 1.52% Loan Against Fixed Deposits Loans to the Govt % 1.06% % 0.00% % 0.86% % 0.55% % 0.00% % 0.45% OTHERS % 0.87% % 0.67% % 0.83% Non- Enterprise TOTAL GRAND TOTAL LOANS & NPL 41, , % 47.46% 7, , % 37.52% 48, , % 45.63% 86, , , , , , Financial Regulation and Supervision Department

18 18 Financial Regulation and Supervision Department