Kathmandu, July 12

With the surge in government expenditure and uptick in remittance, commercial banks witnessed sudden growth of deposits between June 17 and July 8.

As per the latest data provided by the Nepal Bankers' Association (NBA) - the umbrella organisation of commercial banks in the country - the total deposits of commercial banks witnessed gradual recovery, increasing by Rs 94 billion during the month of Asadh (from mid-June) so far to reach Rs 4.494 trillion.

After slipping by six billion rupees week-on-week in the week ending June 17, deposit growth picked up significantly thereafter - by Rs four billion in the week ending June 24, Rs 34 billion in the week ending July 1 and Rs 62 billion in the week ending July 8.

At the end of the 11th month of the current fiscal year, the total deposit of commercial banks had stood at Rs 4.400 trillion.

The banking system has been affected due to low government expenditure, excessive level of disbursement of loans in unproductive sectors A and slackness in remittance growth.

However, the surge in capital expenditure towards the end of the fiscal year helped to increase the deposit collection. On Saturday alone, Rs 25.56 billion of the allotted funds were used from the government's treasury, according to the Financial Comptroller General Office (FCGO).

Likewise, remittance inflows, which had slowed down since the beginning of the current fiscal year, has seen a slight uptick in the recent times. According to the latest macroeconomic update unveiled by the Nepal Rastra Bank (NRB) on Monday, the remittance rose by 3.8 per cent to Rs 904.18 billion in the first 11 months of the current fiscal year, compared to a jump of 12.6 per cent in the same period of previous year NRB - the central monetary regulatory authority - has been introducing several measures aiming at averting the liquidity crunch plaguing the market since the beginning of the current fiscal year.

Through the Monetary Policy, NRB had replaced the provision of credit to core-capital plus deposit (CCD) ratio with a maximum limit of 85 per cent by CD ratio with a ceiling at 90 per cent. The target has to be achieved by the end of this fiscal.

As per NRB, the average CD Ratio in three weeks was 88.57 per cent.

As a result, banks had tightened disbursement of loanable funds. This was also evident in the NBA data which show credit flow of commercial banks over the review period fell by Rs 19 billion. The total loan disbursement stood at Rs 4.193 trillion on June 14 and it had slipped to Rs 4.174 trillion on July 8.

The week-on-week analysis of the lending figures reveals that total lending had contracted by five billion rupees in the week ending June 17, by six billion rupees in the week ending June 24, and by Rs 10 billion in the week ending July 8. However, in the week ending July 1, the total lending actually increased by two billion rupees.

A version of this article appears in the print on July 13, 2022, of The Himalayan Times.