Kathmandu, March 21

Commercial banks facing scarcity of fresh deposits were surprised with the sudden growth of deposit in between March 9 and 16. Deposits of commercial banks increased by Rs 16 billion within a week, which is a record high deposit growth in recent months for the deposit-starved banks.

As per data collected by Nepal Bankers’ Association (NBA) — the umbrella network of commercial banks in the country — local currency deposit of commercial banks reached Rs 2,154 billion on March 16 from Rs 2,138 billion of March 9.

Banks were surprised by the sudden rise in deposits in the banking system as they have been facing deposit crunch in the banking system due to low government expenditure, slow growth of exports and slackness in remittance growth. As a result, banks have been facing crisis of loanable funds to expand business.

As per Rastriya Banijya Bank (RBB), which had collected more deposits in this period, deposit collection increased substantially as the government has transferred fund for distribution of land compensation to the affected locals of the Budhigandaki hydel project in Gorkha and Dhading districts.

The government transferred Rs five billion to the Gorkha branch of RBB during that period, according to Bhupendra Pandey, deputy CEO of the state-owned RBB.

Commercial banks have resorted to expanding their business to sustain the profit growth they used to earn in the past after the increment in paid-up capital requirement but the slow deposit growth has adversely affected their plans to expand their business.

Banks have floated loans worth Rs 229 billion against deposit collection of Rs 161 billion in the first eight months of this fiscal, as per data obtained from NBA. Commercial banks can float loans of up to 80 per cent of the deposit plus core capital of the bank as per the rules of Nepal Rastra Bank.