June 8: The banking system witnessed an increase in deposit collection by Rs 3 billion in a single day earlier this week.

According to Nepal Rastra Bank (NRB), the total deposits of banks and financial institutions were Rs 5530 billion on Monday, which increased to Rs 5533 billion on Tuesday.

During this period, deposits of development banks and finance companies decreased, but that of commercial banks increased. Compared to Monday, deposits of development banks and finance companies decreased by Rs 2 billion on Tuesday, while deposits of commercial banks increased by Rs 4 billion. As of Tuesday, total deposits in development banks and finance stood at Rs 648 billion while the deposit portfolio of commercial banks was Rs 4884 billion.

Despite the increase in deposits, the credit investment of banks and financial institutions remained stable. BFIs disbursed a total of Rs 4354 billion in loans as of Tuesday.

Although the interest rate of the banks decreased recently, the flow of money is constant. Due to high interest rates, reduction in economic activity and pressure on primary capital of banks, the credit flow has not been encouraging.

Due to lack of loan investment, the credit-deposit ratio (CD ratio) of banks fell to 84.36 percent. Banks can disburse loans until the CD ratio reaches 90 percent. As the capital adequacy ratio of some banks has reached the specified minimum limit, they have not been able to disburse loans.

Interbank interest rate is decreasing as well due to the high liquidity and absence of loan investment. NRB said that the interbank interest rate remained at 6.67 percent on Tuesday.