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