August 22: Bank deposits have started to decline after the government raised internal debt at the beginning of the current fiscal year (FY).

According to Nepal Rastra Bank (NRB), the bank deposits which had Rs 5767 billion at the end of the last fiscal year (mid-July), has dropped to Rs 5610 billion on August 19. Compared to August 18, bank deposits decreased by Rs 2 billion on August 19.

After the facility of calculating 80 percent of the amount in the accumulated funds of the local level was reduced to 50 percent, the deposits of the banks decreased by Rs 109 billion on the second day of the current fiscal year. The government then raised Rs 11.6 billion through development bonds and Rs 2 billion through treasury bills, affecting the deposits of banks.

Deputy Spokesperson of Nepal Rastra Bank Dr Dilliram Pokharel said that the money of banks and financial institutions went to government accounts and therefore the deposits decreased.

"Currently, there is no big fluctuation in deposits," he said, "Maybe, some of the decreased amount has been deposited in the government account through bonds and tax payments."

Pokharel said that the liquidity situation in the banks has eased as the credit flow has also decreased along with the bank deposits.

Since the beginning of the current fiscal year, the credit flow of banks and financial institutions have also decreased by Rs 20 billion. At the end of last year, the total loan investment of banks stood at Rs 4879 billion, which decreased to Rs 4859 billion on August 19, the central bank informed New Business Age.

On August 19, the average credit-deposit ratio (CD ratio) of banks remained at 83.56 percent. Similarly, the average interest rate of interbank transactions was 6.2 percent.

Only on Monday, the central bank renewed treasury bills worth Rs 6.23 billion. The average interest rate has been maintained at 5.81 percent for the T-bills worth Rs 4.23 billion with maturity period of 91 days and 6.43 percent on the 364-day treasury bills worth Rs 2 billion.