Average CCD ratio of banks at 77.65pc in Q2
Kathmandu, January 20
Commercial banks seem to have been more cautious towards maintaining the credit to core capital plus deposit (CCD) ratio under the regulatory requirement as the average CCD level of banks stood at 77.65 per cent at the end of the second quarter (mid-January) of this fiscal year.
Slow growth of deposits, mismatch between deposit collection and credit expansion, and withdrawal of a huge amount from the banking channel for the purpose of tax submission were expected to generate pressure on the banks to maintain the CCD level as per the regulatory provision.
“Banks were anxious that their CCD level could overshoot the permissible level, however, the situation is better than what was feared,” said Gyanendra Prasad Dhungana, president of Nepal Bankers’ Association.
Normally, deposit collection in the second quarter slows down as the government’s expenditure remains sluggish during that time and on the other hand the tax collection is high during this period as the government collects the first tranche — 40 per cent — of estimated annual income tax by mid-January, which puts pressure on banks to maintain their deposits. The Inland Revenue Department collected Rs 48 billion in January.
The CCD level of the banks shows that they are not facing any severe credit crunch as was assumed previously. Banks can extend loans of up to 80 per cent of core capital plus deposits and of the remaining 20 per cent, six per cent is deposited at Nepal Rastra Bank (NRB) as cash reserve, around five per cent remains as liquid cash in bank vaults, and eight to nine per cent is invested in government bonds/treasury products. Liquidity crisis is when there is pressure on the cash reserve in NRB and credit crunch is a situation when the banks are close to crossing the permissible CCD level of 80 per cent.
Banks in the past few weeks had made a big hue and cry stating that the credit crunch situation was severe and they were likely to overshoot the permissible CCD level.
However, the central bank based on a few indicators like low interbank rate, withdrawal of cash reserved by the banks with the central bank, and non-utilisation of standing liquidity facility that the central bank provides to banks for domestic payments when banks are in a critical situation, had said that the credit situation was not as severe as made out to be.
Central bank officials have said that the situation in the coming days will be easier as cash that flowed in the market during the elections will come to the banks gradually and government’s expenditure will also rise from the end of the third quarter.
As per data unveiled by Nepal Bankers’ Association — umbrella network of the commercial banks in the country — government-owned Rastriya Banijya Bank and Nepal Bank have the highest lending capacity as their CCD level is just 69 per cent and 75.25 per cent, respectively.
Likewise, Prabhu Bank’s CCD level is just 75.97 per cent, which is the lowest among private banks. Some of the banks namely, Agricultural Development Bank and Bank of Kathmandu are about to meet the permissible CCD level of 80 per cent.
Meanwhile, bankers have said that when the CCD level crosses 77 per cent there will be pressure on the banks to maintain CCD level because the withdrawal of call deposits could also affect the banks to maintain balance between deposit collection and credit expansion.
Quick look
Name of Bank
CCD (As of end of Q2)
Agricultural Development Bank
79.50%
Bank of Kathmandu
79.64%
Century Commercial Bank
78.00%
Citizens Bank International
77.41%
Civil Bank
76.41%
Everest Bank
76.22%
Global IME Bank
78.12%
Himalayan Bank
79.30%
Janata Bank Nepal
78.14%
Kumari Bank
77.23%
Laxmi Bank
77.94%
Machhapuchchhre Bank
79.61%
Mega Bank Nepal
79.30%
Nabil Bank
76.50%
Nepal Bangladesh Bank
79.27%
Nepal Bank
75.25%
Nepal Credit & Commerce Bank
78.70%
Nepal Investment Bank
78.46%
Nepal SBI Bank
77.03%
NIC Asia Bank
78.19%
NMB Bank
76.60%
Prabhu Bank
75.97%
Prime Commercial Bank
77.82%
Rastriya Banijya Bank
69.00%
Sanima Bank
78.98%
Siddhartha Bank
78.32%
Standard Chartered Bank Nepal
78.90%
Sunrise Bank
78.50%
Source: Nepal Bankers’ Association