In the last three months, 2 trillion 56 billion deposits have been collected and 38 billion loans have flowed into the bank. During the same period last year, deposit collection was 1 trillion 29 billion and loan was 98 billion.
With only five days left for the end of the first quarter of the current financial year, banks and financial institutions have accumulated about 11.5 trillion rupees of loanable amount (excess liquidity). With the beginning of the new financial year, the amount that can be given to banks and financial institutions has started to increase. Due to the expansionary budget and monetary policy in the current financial year, it was expected that credit flow would increase and the loanable amount accumulated in banks would decrease.
In the first months, signs of increasing loan demand were also seen. There was also an increase in opening of letters of credit (LC) in banks. But due to the uncomfortable situation created after the demonstration on August 23 and 24, the banks say that credit expansion has come to a standstill. For this reason, the deposits in banks and financial institutions are continuously increasing, and the loanable amount is also accumulating.
Total deposits in banks and financial institutions till last week (October 20th) are 74 trillion 60 billion rupees. During the same period, the credit deposit ratio (CD ratio) of banks and financial institutions is 74.55 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 trillion 29 rupees. Based on the mentioned data, it seems that there is 11 trillion 66 billion more liquidity in banks and financial institutions 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, even though 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 get to go (lend) up to 89 percent. Even if these facts are taken as a basis, experts say that the financial system has an amount of Rs. Last July, banks and financial institutions had 10 trillion 12 billion rupees and in August 10 trillion 46 billion rupees. By the third week of October, this amount has increased to 11 trillion 66 billion rupees.
In the last 11 months of the financial year, the average loanable amount was 6 trillion rupees, but it suddenly increased to 10 and a half trillion rupees in the middle of June. In the subsequent months too, the order of adding loans has not stopped.
In the previous three months of the current financial year (from July to October 20), deposits of 2 trillion 56 billion rupees have been added in banks and financial institutions. During the same period, only 38 billion loans have been disbursed. Compared to the same period of the last financial year, deposits have increased by a lot, while lending is less than half. In the first three months of the last fiscal year (from July to October 20), deposits increased by 1 trillion 29 billion, while lending was 98 billion rupees.
Experts in the financial sector say that now the external sector of the economy is strong, the interest rate has come down a lot, and now the government should focus on investment expansion. Parshuram Chhetri Kunwar, an expert in the financial sector, says that the credit demand has not increased due to the uncomfortable situation created after the Genji exhibition when there were signs of improvement in the economy. At this time, the confidence of the entire society has fallen. Most of all, the confidence of the private sector and the police seems to have decreased,' he said, 'In such a situation, credit and investment will not increase.' Therefore, an official of Rashtra Bank said that in order to increase credit expansion, the government should initially increase spending. According to him, even though the government has raised loans, it should increase investment in big infrastructure projects and national pride projects that give quick returns. He says that many indicators of the economy have given support to the government for investment expansion.
The liquidity in the market is constantly increasing and the National Bank is regularly withdrawing money from the market. At the same time, the National Bank has withdrawn 50 billion rupees from the market on Sunday. On the first day the office opened after Dasain, 90 billion rupees were withdrawn from the market on Tuesday and 20 billion rupees on Wednesday. As of Sunday, Rastra Bank has 7 trillion 65 billion rupees of the amount withdrawn. As the mentioned amount has been withdrawn by the National Bank for a short period of time, the amount will come to the market after the maturity period. This seems to create more liquidity in the market.
In the last financial year, the National Bank has set a target of expanding loans by 12 and a half percent. To fulfill this goal, banks and financial institutions had to extend 6 trillion 82 billion rupees of credit. But until last June, the loan disbursed by the banks was less than the target by 2 trillion 51 billion rupees.
In the current financial year, Rastra Bank has set a target of 12 percent credit expansion. In the fiscal year 2080/81, the National Bank had set a target of 11.5 percent credit expansion and had set a target of 12.5 percent for last year. Although the goal of credit expansion was not achieved in the previous years, the goal of 12 percent has been set again this year.
Santosh Koirala, president of Nepal Bankers Association, said that now the situation of lending by banks and financial institutions is like a standstill. "Now not only loans have not been disbursed, but interest has also not been paid," he said, "promissory notes have not been opened, interest has not been paid, there is no demand for loans, the entire banking sector is at a standstill."
Interest rates have fallen to a 50-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. They say that after the last movement, when the economic activities are not going on because of the low market demand, the problem has increased.
