September 28: Bank deposits have continued to grow in the third week of September as well.

Bank deposits have continued to rise mainly due to the long-term deposit schemes launched by the commercial banks to attract deposits as well as the increase in interest rates from mid-September and the positive impact of remittance inflow ahead of the festive season.

According to the Nepal Bankers Association, the deposits of commercial banks increased by Rs 26 billion in the third week of September. By mid-September, the total deposits in banks were Rs 4485.51 billion, which increased to 4511.65 billion by September 23.

In the current fiscal year, the bank deposits had continuously decreased till the third week of August. However, bank deposits have been continuously increasing since the fourth week of August. The bankers’ association informed that bank deposits increased by Rs 52 billion between mid-August to mid-September.

The reasons for the increase in bank deposits are considered to be new deposit schemes, hike in interest rates and increase in remittances. Lately, banks have announced a 21-year term deposit plan that gives up to 10 times the initial deposit. Banks are competing with each other to attract customers to their fixed deposit schemes.

Similarly, bankers say that the remittance inflow has been positive due to the festive season of Dashain which has just kicked off. This has increased the activities in the domestic market, and deposits have increased as well. Even the rise in the value of the dollar has had a positive impact on remittances.

Banks and financial institutions have increased the interest rate from September 17, which had remained stable for the last six months. The banks fixed the new interest rates according to the instructions of the Nepal Rastra Bank.

As per the instructions of the NRB, it is possible to increase the interest rate by up to 10 percent compared to the previous month. Accordingly, the banks increased the interest rate of individual term deposits to 12.13 percent, institutional term deposits to 10.13 percent and remittance term deposits to 13.13 percent.

Despite the increase in deposit collection, banks are restraining from lending. In the third week of September, credit flow of commercial banks increased by Rs 4 billion only. Banks have not disbursed loans to maintain the credit-deposit ratio (CD ratio) and capital adequacy ratio fixed by NRB. The average CD ratio as of the third week of September is 87.21 percent, which is supposed to be within 90 percent as per the instruction of NRB. Banks that do not maintain the CD ratio will be fined for the excess amount.