KATHMANDU, MARCH 28
After an uptick last month, deposit collection in the commercial banks has slowed down again.
As per the latest data provided by the Nepal Bankers' Association (NBA) - the umbrella organisation of the commercial banks in the country - the total deposits of 27 commercial banks decreased by Rs three billion in between March 14 and 25 to Rs 4.330 trillion.
The deposit collection had slumped by as much as Rs five billion on March 18 from Rs 4.333 trillion recorded on March 15, but it made some recovery in the latter part of the review period.
The banking sector has been facing liquidity crunch owing to the government's failure to accelerate development and slackness in remittance growth, explained NBA CEO Anil Sharma.
"The banking system has witnessed sluggish deposits for several months in the current fiscal year. Hopefully the surge in the number of migrant workers leaving for overseas jobs in recent times will result in an increase in remittance and thereby positively impact the deposit growth," he added.
Even as more than eight months of the current fiscal year has passed, the total capital expenditure as of yesterday stood at just 22.94 per cent, according to the Financial Comptroller General Office.
At the same time, the latest macroeconomic update of the Nepal Rastra Bank had revealed that during the seven months of fiscal year 2021-22, remittance inflows had decreased by 4.9 per cent to Rs 540.12 billion against an increase of 10.9 per cent in the same period of the previous year.
Because of the ongoing liquidity crunch, banks have been struggling to disburse loans.
This is evident through the NBA data which show credit flow of commercial banks over the review period fell by Rs two billion. The total loan disbursement had reached Rs 4.170 trillion on March 25 against Rs 4.172 trillion till March 14.
"The banks have been unable to cater to the credit demand due to slowdown in deposits," Sharma informed.
The country's financial market is currently under pressure to manage liquidity, which has been blamed largely on the NRB implementing the rule of credit-deposit (CD) ratio. Through the Monetary Policy, NRB has 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, or mid-July.
In line with the central bank's instructions to attract deposits, commercial banks, which had been offering 10.05 per cent interest per annum on fixed deposit prior to February 1, are currently offering 11.03 per cent. Likewise, the interest rate on savings accounts has gone up to 6.03 per cent. However, the measures seem to have largely failed to attract depositors.
