It is seen that the loanable capital (more liquidity) in banks and financial institutions will increase further. Due to continuous increase in remittance flow, money for government expenditure starting to come to the market, limitation in consumption, even though deposits are increasing, the expected improvement in credit flow is not possible, the amount that can be given to banks and financial institutions is increasing more and more.

The National Bank has been withdrawing money from the market on two consecutive days (Sunday and Wednesday) since one and a half years because the loanable amount is too much.

Rastra Bank has been withdrawing money for 21 days, but suddenly last week it withdrew money for 42 days and on Wednesday it withdrew 50 billion for 63 days. This is the first time that money has been withdrawn for so many days to manage liquidity. Rashtra Bank officials say that this time money has been withdrawn for a long time in anticipation of an increase in liquidity. 

According to Parshuram Kunwar Chhetri, a former banker and an expert in the banking sector, more liquidity has been added to the financial system due to the failure to expand loans in proportion to the increase in deposits. "Toward the end of the financial year, the payment of government jobs has increased, which is coming to the market. Remittances are increasing, since the end of the financial year, the priority of the banks is on debt recovery, he said, "Even though deposits have increased, the growth rate of loans is low, so it seems that more liquidity in the bank will increase." 

In the 11 months of the current financial year (from July to June), banks and financial institutions collected 5 trillion 2 billion deposits and provided 3 trillion 95 billion loans. In the last two months, deposits have increased by 1 trillion 37 billion, while loans have expanded by only 29 billion. As the gap between deposit collection and loan expansion started widening, the National Bank had to withdraw money for a long period of time. 

In the current financial year, the National Bank has set a target to expand loans by 12 and a half percent. To meet this target, banks and financial institutions should extend loans of 6 trillion 82 billion rupees. But the loans provided by the banks till last May are 2 trillion 85 billion rupees less than the target. In order to achieve the target set by the National Bank, in the remaining month, banks have to extend additional loans of Rs. 3 billion, which is not possible, experts say.

In the last fiscal year, when 7 trillion 25 billion deposits were collected, 2 trillion 91 billion rupees were extended. "Last year, the National Bank set a target of 11.5 percent credit expansion and set a target of 12.5 percent for this year, which was ambitious in itself. Because even in June of last year, the basis for credit expansion had not been prepared properly,' said the chief executive officer of a bank, 'the investment environment did not improve throughout this year. So far, only 7 percent of loans have been extended, this year the target will not be met.' 

In all months of this year, an average of more than 6 billion investable funds have accumulated in the financial system. Interest rates fell to their lowest level in 47 months. However, experts say that the lack of acceleration in credit expansion is due to the lack of improvement in the overall demand and the fact that industries are operating at less than half of the target capacity. 

By the first week of June (1-8), banks and financial institutions have more liquidity of 7 trillion 70 billion rupees. Banks and financial institutions can lend up to 90 percent of deposits as per the instructions of the National Bank. Banks must keep a minimum of 20 percent of deposits in cash for potential savings returns. By reducing the amount of cash required, banks and financial institutions can maintain a CD ratio of up to 89 percent. The same amount is analyzed here as the loanable amount. 

In this way, in the last month of the last financial year (June), the banks had 7 trillion 54 billion more liquidity. According to this, in July 6 trillion 69 billion, in August 6 trillion 77 billion, in October 6 trillion 36 billion, in October 7 trillion 24 billion, in November 4 trillion 7 billion, in January 6 trillion 55 billion, in January 6 trillion 47 billion, in February 6 trillion 55 billion, in March 6 trillion 65 billion, in May 6 trillion 89 billion and in May 7 trillion 53 billion. 

For liquidity management, the National Bank has withdrawn only 29 trillion 62 billion rupees from the market this year (from July to June Wednesday) through deposit collection tools. Rastra Bank has also been withdrawing money from the market for three days through the permanent deposit facility. Adding this also increases the amount drawn from the market. As of Wednesday, 4 trillion 56 billion rupees are in the Rashtra Bank out of the withdrawals through both channels. Of this, 2 trillion 69 billion rupees are in deposit collection and 1 trillion 87 billion rupees in permanent deposit facilities, according to Rastra Bank. 

Officials of the National Bank admit that the annual target cannot be achieved because the economic activity has slowed down due to the economy not being viable and the loan demand has not increased as a result. They say that although monetary flexibility has been adopted in the recent past so that the demand for credit increases and financial activities become sustainable, the credit expansion has not been as per the target. There is more liquidity in the financial system. The monthly reports show that the National Bank has to spend a large amount of money for liquidity management. Santosh Koirala, President of the Bankers Association, said that due to the low demand for loans in the market, some banks are under pressure from the primary capital (core capital) and are unable to provide loans. Although the National Bank has set a target of 12.5 percent credit expansion this year, it seems that it will reach around 9 percent by the end of this year. In recent days, there is an improvement in the loan recovery of banks. As this process increases, in the coming days, lending may accelerate," he said. 

The monthly report of Rashtra Bank has shown that among the loans from banks and financial institutions to the private sector, 63.1 percent of the loans went to the non-financial institutional sector and 36.9 percent of the loans went to the individual and household sectors. During the same period last year, this share was 63.7 and 36.3 percent respectively. 

"In the past 10 months, commercial banks' loans have increased by 7.6%, development banks' loans by 4.1% and finance companies' loans by 6.5%," the report says. The share of mortgage loans was 12.1 and 68.5 percent respectively.

In the 10 months of the current financial year, among the loans invested by banks and financial institutions, loans to the industrial production sector increased by 9 percent, construction sector by 12.3 percent, wholesale and retail trade sector by 4.9 percent, transportation, communication and public service sector by 11.9 percent, service industry sector by 7.9 percent, and consumption sector by 8.8 percent. From last July to April, among the loans from banks and financial institutions, periodic loans increased by 5.1 percent, margin loans by 39.3 percent, trust receipt (import) loans by 58.1 percent, hire purchase loans by 4.1 percent, cash flow loans by 3.4 percent, and real estate loans (including personal residential house loans) by 5.2 percent. However, overdrafts have decreased by 12.9 percent.