March 20: Deposit collection of banks and financial institutions (BFIs) have started increasing. BFIs have reported an increase in deposit collection with the increase in capital expenditure of the government and the increase in interest rates on deposits.

According to the Nepal Bankers Association, commercial banks have collected deposits of Rs 22 billion between mid-February to mid-March. A month ago, deposit collection had declined by Rs 13 billion between mid-January to mid-February.

Compared to January, the banks had raised interest rates on savings by 10 percent in February. Accordingly, the maximum interest rate on fixed deposits of commercial banks was raised to 11.3 percent.

President of Nepal Bankers’ Association Anil Kumar Upadhyay said that although there has been no significant growth in deposits, there has been a general improvement. Banks have not raised interest rates in March.

Compared to mid-January, deposits of 17 banks have increased and deposits of 10 banks have decreased in mid-February. The deposits of Machhapuchhre Bank increased by Rs 4.81 billion. Similarly, deposits of Nabil Bank declined the most by Rs 2.78 billion.

The credit flow of banks, which had been aggressive in the beginning of the current fiscal year, has started shrinking to maintain the credit-deposit (CD) ratio of banks and also due to liquidity crisis. Banks have extended credit of Rs 17 billion in mid-February/mid-March. Last month, they have invested only Rs 12 billion credit.

Nepal Bankers’ Association informed that the average CD ratio of banks was 90.99 percent till March 14. The central bank has directed banks to reduce the CD ratio to less than 90 percent by July 16.

Deputy spokesperson of Nepal Rastra Bank Narayan Prasad Pokhrel said that the CD ratio of 22 banks is more than 90 percent at present.

In the first eight months of the current fiscal year, commercial banks have collected deposits of Rs 131.12 billion and disbursed loans of Rs 451.24 billion.

As the credit flow of the banks exceeds the annual target, the NRB has increased the bank rate to discourage them and has also made provision for keeping cash margin for import of various goods.