With the beginning of the new financial year, the amount that can be loaned to banks and financial institutions (excess liquidity) has increased. According to the data of Rashtra Bank, the amount that could be loaned was an average of Rs.

As of mid-June (last Wednesday), total deposits in banks and financial institutions are 72 trillion 92 billion rupees. During the same period, the credit deposit ratio (CD ratio) of banks and financial institutions is 75.78 percent.

According to the directives of the National Bank, banks and financial institutions can lend up to 90 percent of total deposits. During the same period, the total loan disbursement of banks and financial institutions is 56 billion rupees. Based on the mentioned data, it seems that banks and financial institutions have excess liquidity of 10 trillion 50 billion rupees at the end of June.

 But banks and financial institutions must keep 20 percent of their total deposits in cash in the bank. All banks maintain liquidity at a rate of 20 percent and spend the same amount as a CD ratio of about one percent.

Therefore, although banks and financial institutions are allowed to maintain a CD ratio of up to 90 percent of deposits, as they have to maintain 20 percent liquidity, they can go up to 89 percent. Even if these facts are taken as a basis, experts say that the financial system has an amount of 976 billion 900 million rupees that can be loaned to banks and financial institutions by the end of June. 

Financial sector expert Parshuram Chhetri Kunwar said that now the external sector of the economy is strong, interest rates have come down a lot, and now the government should focus on investment expansion.

Finance policy (government) plays the main role in increasing loan demand, monetary policy will facilitate it. Therefore, in order to increase credit expansion in the current situation, the government should initially increase spending,'' he said. Because many indicators of the economy are currently supporting the government to expand investment. He suggested that the federal government should also increase the capacity of the state and local governments to expand capital expenditure. 

With the increase in liquidity in the market, the National Bank has again been withdrawing money from the market for a long period (42 days). Officials of Rashtra Bank say that money has been withdrawn for the long term in anticipation of an increase in liquidity. In the last fiscal year, banks and financial institutions collected 7 trillion 96 billion deposits and provided 4 trillion 31 billion loans. Thus, as the gap between deposit collection and credit expansion started to widen, the state bank had to withdraw money for a long period of time.

In the last financial year, the National Bank has set a target of expanding loans by 12 and a half percent. To meet this target, banks and financial institutions had to extend loans of 6 trillion 82 billion rupees. But the loan disbursed by the banks till last June is 2 trillion 51 billion rupees less than the target. 

In the previous financial year 2080/81, when 7 trillion 42 billion deposits were collected, 2 trillion 91 billion rupees were extended. "Rastra Bank, which set a target of 11.5 percent credit expansion last year, set a target of 12.5 percent for last year, which was ambitious in itself. Because even in June of last year, the basis for credit expansion was not well prepared,'' said the chief executive officer of a bank. However, the National Bank has set a target of 12 percent credit expansion for the current financial year. 

Interest rates have fallen to a 48-month low. However, experts say that the reason for the failure of credit expansion is the lack of improvement in overall demand and the fact that industries are operating at less than half of the target capacity. The National Bank has issued a very loose monetary policy for the current financial year in order to accelerate the economy when the economic activities are not becoming viable due to low market demand.