Kathmandu, July 20

Bankers are anxious about the sources of deposit collection to expand credit in this fiscal.

Banks and financial institutions (BFIs) have to collect deposits worth around Rs 700 billion in this fiscal to expand their credit portfolio as desired by Nepal Rastra Bank (NRB). The NRB has set a target of 20 per cent credit growth in this fiscal through Monetary Policy 2017-18. To expand credit to the private sector by 20 per cent, BFIs have to collect deposits worth Rs 700 billion in this fiscal, as per bankers.

However, deposit growth in the previous fiscal stood at only around Rs 350 billion.

In an interaction programme on Monetary Policy organised by National Banking Institute (NBI) today, bankers sought the source of deposit from the central bank to expand credit as envisioned by the monetary policy to support the government’s economic growth target of 7.2 per cent.

Government expenditure, remittances, and internal revenue generation of BFIs (loan recovery, among others) are the sources of deposit collection. Bankers worry that slow government expenditure and sluggish growth in remittance inflow could adversely affect deposit collection, thereby hitting credit expansion.

However, NRB Executive Director Nara Bahadur Thapa said that BFIs should not fret too much about deposit collection. “There was deposit growth of 18 per cent in the previous fiscal even during the time of slow government expenditure and low remittance growth,” he said, adding, “BFIs will have additional Rs 242 billion fund generated from the hike in paid-up capital.”

Thapa further said that the credit expansion target of NRB is rational because BFIs will not have to face lack of deposit as the government is planning to spend fiscal budget of Rs 1,278.99 billion in this fiscal.