The economy is battling a liquidity crisis


The release of an extensive study on the deposit and lending trends in the nation’s commercial banks has been announced. This is the information that has been provided as of Kartik.

When comparing the total deposit collected in Kartik to the statistics published in Ashwin, commercial banks have reported a total of 35.31 Arba squeeze in the total deposit obtained. In terms of percentage change from its previous figure, NIC Asia Bank Limited (NICA) has experienced the most squeeze: a reduction of 13.89 Arba. Meanwhile, Himalayan Bank Limited has reported a 14.6 Arba increase in monthly deposits over the previous month.

On the other hand, banks have been hammered by a surge in capital demands from both the general public and corporations at the same time. As the economy has begun to recover from the closure, businesses and individuals have begun to place demands on financial institutions for loans and other forms of financing. According to commercial banks, the total monthly loan forwarding has increased by 36.12 Arba in the last month. Individual increases of 6.07 Arba were reported by Himalayan Bank Limited, which was the biggest in the industry. Rastriya Banijya Bank, on the other hand, has reported a decrease of 2.56 Arba in its figures.

Given the combination of the two conditions, there has been increased pressure on the banks to advance loans at a time when deposit funds are drying up. Because of this, banks are under pressure to hike interest rates in order to compete for depositors. Meanwhile, the central bank has countered by limiting the amount of interest rate increases that can be implemented in order to protect borrowers and businesses from interest costs.

The Finance Minister, Janardan Sharma, stated that increasing government capital expenditure in the short run and managing foreign resources are two ways to achieve liquidity balance during a meeting with the Governor of the National Reserve Bank, CEOs, and representatives of commercial banks last Friday at the Ministry of Finance in New Delhi.

He stated that the only way to overcome the liquidity crisis in the long run was for capital to be mobilized in the industrial sector. The president declared that “as soon as is mobilized in the manufacturing sector, many difficulties will be handled,” and he urged banks to “tighten credit to unproductive industries.”

“We have now tightened the rules on some imports. Additionally, banks should raise restrictions in the same way “Sharma shared his thoughts.

During the discussion, Finance Madhu Kumar Marasini explained that, contrary to what the banks have claimed, the transfer of local level to commercial banks will not result in a reduction in liquidity. “Money does not disappear in one fell swoop. There isn’t nearly as much money as you claim “Marasini himself.

Additionally, Chairman of the Nepal Bankers Association and Chief Executive Officer (CEO) of ADBL Anil Kumar Upadhyaya said that raising the government’s capital expenditure could help to alleviate the shortage of liquidity in the market. He also stated that if mechanisms were put in place, such as Hundi control, the rapid entry of foreign loans or grants, and the preservation of 100 Arba of at the local and corporate levels in commercial banks, the liquidity situation would be resolved promptly.

In a same vein, Anil Shah, the CEO of Nabil Bank, emphasized the importance of increasing foreign exchange reserves by halting the import of non-essential commodities. Among his recommendations was that the importation of chocolate and other foodstuffs be prohibited.

As of Kartik, the CD ratio is at 90.15.

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