KATMANDU, September 22: It has been revealed that commercial banks have collected Rs 26 billion in deposits in the past week at a time when financial institutions are expected to face a liquidity shortage.
However, it is not clear whether this growth in deposits is short-term or long-term. Bankers say the liquidity shortage in banks and financial institutions (IBFs) will be solved by spending from the government’s capital budget.
Even after two months of the current fiscal year, the government has not been able to spend the budget, which would have contributed to the liquidity crisis. In the years before the COVID-19 pandemic hit the country, CIBs faced a cash shortage only after the holiday season.
This problem is expected to worsen in the second half of the current fiscal year, as signs of a liquidity squeeze were already seen ahead of Dashian, a Hindu festival celebrated by a majority in Nepal. “The government has no choice but to step up the pace of capital budget spending to reduce the liquidity crunch,” said one banker. Last year, more than Rs 200 billion of cash was accumulated in the banking system when the COVID-19 pandemic struck. “Even though deposit collection has increased over the past week, it is still much lower in the current market,” said the managing director of another commercial bank. “We have not been able to arrange deposits due to the increasing demand for loans.”
According to the Nepal Bankers Association (NBA), deposits, which fell by 7 billion rupees in the third week of August, increased by 26 billion rupees in the third week of September. The collection of deposits had increased by Rs 8 billion during the last week of August and Rs 4 billion during the second week of September.
According to the NBA, along with the collection of deposits, investments also increased during this period. During the third week of September, these banks invested Rs 28 billion in the form of loans. During the second week of August, banks invested Rs 25 billion in loans.
According to data released by the NBA on Tuesday, commercial banks have collected 4.171 billion rupees in deposits and invested 3.872 billion rupees as of September 16. Bankers say most banks face problems growing their businesses and managing the cash reserve ratio. (CRR) due to the liquidity crisis.
Bankers say the interbank rate has reached 5% due to the liquidity crisis.