August 9: Bank deposits have continued to decline in the first week of August. Although the banks faced a setback in deposit collection, they have increased credit flow during this period.

According to the data provided by the Nepal Bankers Association, the deposit collection of banks declined by Rs 4 billion during the first week of August. Deposit collection of banks had declined by Rs 64 billion in the third week of July and by Rs 28 in the fourth week of July. It means that the deposit collection of banks has declined by Rs 96 billion so far in the current fiscal year.

The total deposits of banks by the end of the last fiscal year stood at Rs 4541 billion. It has now decreased to Rs 4446 billion as of August 5.

Spokesperson of Nepal Rastra Bank Dr Gunakar Bhatta says that the banking system witnessed withdrawal of cash in large amount as the Nepal Oil Corporation paid its long-standing dues to the Indian Oil Corporation during the beginning of the current fiscal year.

Similarly, the deposits of banks also declined towards the end of the last fiscal year as the cheques issued by the government were withdrawn during that period, says Bhatta.

Although the bank deposits have declined, credit flow has increased during the same period. Initially, the banks had reduced credit flow in the first week two weeks of the current fiscal year but have increased credit flow by Rs 2 billion in August.

The credit flow of banks had declined by Rs 10 billion in the third week of July and by Rs 1 billion in the fourth week of July.

The total credit flow of banks as of August 5 stands at Rs 4166 billion. The credit flow of banks was Rs 4175 by the end of the last fiscal year.

Banks had been tightening credit flow and focusing on deposit collection due to liquidity crisis. This had helped the banks to maintain the CD ratio as prescribed by the central bank. As of August 5, the average CD ratio of banks stands at 87.69 percent, according to Nepal Bankers Association.