December 21: The deposits of commercial banks increased by 57.22 billion from mid-November to mid-December. The bank deposits increased due to the improvement in remittance inflow and the money withdrawn from banks during the election returning back to the banking system.

According to the Nepal Bankers Association, the total deposits of commercial banks increased from Rs 4563 billion in mid-November to Rs 4621 billion in mid-December. According to the latest report of Nepal Rastra Bank on Current Macroeconomic and Financial Situation of Nepal, the economic indicators have improved due to decline in inflation rate from mid-November to mid-December and increase in foreign exchange reserves and remittance inflow. By mid-December, the remittance inflow has reached Rs 378 billion. This is 20.4 percent more than the inflow of remittance in the previous year. In mid-October to mid-November alone, the country received remittance of Rs 96 billion. The bank deposits have been positively impacted due to the improvement in the economic indicators.

Although bank deposits have increased, loan extension has been comparatively low. The credit flow of banks amounted to just Rs 2 billion in mid-November to mid-December. According to the association, the credit portfolio of banks which was Rs 4222 billion in mid-November climbed to Rs 4224 billion in mid-December. Due to the increase in deposit collection and the decline in credit flow, the liquidity situation in the banks is becoming easier. The total credit to deposit ratio (CD ratio) of commercial banks fell to 86.40 percent by mid-December. As per the instructions of the central bank, this ratio should be maintained at 90 percent.

According to the data published by the NRB, deposits in banks and financial institutions increased by 0.9 percent by mid-November of the current financial year. During the same period of the previous year, such deposits increased by 1.3 percent. In between mid-October to mid-November, the credit flow of banks and financial institutions increased by 1.5 percent. The average base rate of commercial banks was 7.2 percent last by mid-November last year, but this year it has remained at 10.60 percent.