Kathmandu: Bankers seem to be running from pillar to post as the banks and financial institutions (BFIs) have come under pressure due to lack of deposits and increasing interest rates.
After holding a discussion yesterday with the governor of Nepal Rastra Bank (NRB) — the central monetary and regulatory authority — representatives of Nepal Bankers’ Association (NBA) met the finance secretary today to seek government’s help in resolving the problems being faced by the BFIs.
During the meeting today with Finance Secretary Shankar Prasad Adhikari, NBA representatives sought government’s help in increasing flow of liquidity in the market. One of the NBA members informed that the bankers requested government to utilise funds that have remained idle in the government coffers to facilitate commercial banks out of the current jam.
“We have requested the government to settle the problem within one week, but the finance secretary informed that the government will be able to manage some liquidity for BFIs only in the next 15 days or so,” a banker said.
Bankers also stated that the money which was circulated in the market during the elections is yet to make its way back to banking system, and that has also affected the liquidity situation. Similarly, they stated that the government’s grant to the local units has also not been utilised yet, which has further deepened the problem.
“Bankers have brought some of the problems they are facing to our notice and we are also in continuous conversation with the NRB regarding the matter,” Adhikari said. “We have asked the bankers to submit the problems they are facing in writing and the government is willing to help them out.”
Adhikari said he had also assured the bankers that the problem of deposit crunch was a temporary phenomenon and that the situation should improve shortly.
A source at the Ministry of Finance said bankers had also requested that the government’s accounts be operated through commercial banks. Currently, the central bank is operating the government’s account. “However, it is not possible to act on such requests,” an MoF joint secretary said, seeking anonymity.
Bankers have been requesting the central bank and finance ministry to support them in controlling the interest rates, which has started going up since last week. Some commercial banks have even started offering above 13 per cent interest rate to corporate depositors.
With the problem of credit crunch deepening, BFIs have started putting on hold applications for large loan amounts. Due to lack of deposits, banks are under pressure to maintain their core capital cum deposit (CCD) ratio. Banks should maintain the CCD ratio of 80 per cent as per the guidelines of the central bank.
A version of this article appears in print on December 30, 2017 of The Himalayan Times.