September 1: Cash withdrawn from banks right from the beginning of the current fiscal year has started returning to the banking system.

According to the data of Nepal Bankers Association, the deposits of commercial banks declined continuously till the third week of August in the current fiscal year. However, there has been a slight improvement in deposit collection from the fourth week of August.

As of mid-July this year, the total deposits of banks stood at  Rs 4541 billion, which dropped by Rs 116 billion to Rs 4425 billion by August 19. As informed by the association, the deposits of commercial banks increased by Rs 510 million between August 19 and 26.

Executive director of Nepal Rastra Bank, Dr. Gunakar Bhatt says that the bank deposits declined in July due to the payment made by the government to the contractors at the end of the last fiscal year but the amount is gradually returning from the market to the banking system.

With the beginning of the new fiscal year, banks have started investin in loans. Although credit disbursement of commercial banks declined in the third and fourth weeks of July, it started to increase from the first week of August.

Banks that disbursed loans of Rs 11 billion between mid-July to mid-August invested Rs 1.73 billion in the third week of August and Rs 1.30 billion in the fourth week.

As credit flow of banks have exceeded deposit collection, the pressure on the credit-deposit (CD) ratio of banks is increasing. According to the association, the average CD ratio of commercial banks on August 26 is 88.42 percent. In July, the CD ratio of three banks was above 90 percent and most of them were around 90 percent.

According to the instructions of NRB, banks must maintain the CD ratio within 90 percent from mid-July. Banks that are unable to maintain this ratio will be fined.

The data of NRB also shows an improvement in the deposits of banks and financial institutions in recent times. According to NRB, the total deposits in banks and financial institutions as of Sunday stood at Rs 5030 billion. By that time, they have invested Rs 4704 billion.