The liquidity disaster persevered within the banking sector, whilst deposits declined as credit score endured to upward thrust

October 25, Kathmandu. The liquidity problem in the banking sector is still there. The liquidity crisis that started ten years ago has remained the same even after the end of Tihar and Chhath. The liquidity crisis has not been resolved as banks, which have been aggressive in lending, have not been able to increase their deposits.

Nepal Rastra Bank spokesperson Dev Kumar Dhakal said that there was only Rs 17 billion liquidity in the financial sector till Wednesday. NRB has sent Rs 20 billion to the market through bidding even on Thursday after the liquidity crisis deepened in the market. The bank has introduced repo in the banking system through bidding which will mature on November 25.

As there is lack of money to invest in the market, NRB has been sending repo to the market by issuing repo for liquidity management. But this will not alleviate the long-term liquidity crunch in the market. Even before this, NRB has sent such repo for a short period. That money has matured from the market and is about to return to the treasury of the National Bank.

The liquidity crisis has been deepening due to the recent slowdown in government spending and declining remittances. Spokesperson Dhakal says that the liquidity crisis does not seem to be resolved immediately as the banks are relying on short-term resources.

Deposit collection is pathetic

Banks have to invest less than the amount of deposits they collect. But in recent times, bank deposits have declined rather than increased. The liquidity crisis has deepened as deposits continue to decline and credit continues to rise.

According to the Nepal Bankers Association, an umbrella body of chief executive officers of commercial banks, it has declined by Rs 9 billion in the last one week. As of November 29, there was a deposit of Rs. 42.47 trillion in the banks. As of November 3, it has dropped to Rs. 42.38 trillion.

Deposits had declined not only this year but also the previous week. Deposits had dropped to Rs 42.47 trillion from Rs 42.49 trillion on November 20. Despite the decline in deposit mobilization, banks have not been able to reduce credit investment. The credit investment of banks, which stood at Rs. 39.98 trillion on November 19, had reached Rs. As of October 30, it has increased to Rs 40.25 billion.


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