October 31: The money withdrawn from banks out during the Dashain festival has started returning to the banking system. Nepal Rastra Bank (NRB) informed that deposits worth Rs 10 billion were added to the banking system in just a single day after Dashain holiday.

According to NRB, as of Thursday, October 26, the total deposits in banks and financial institutions were Rs 5868 billion, which increased to Rs 5878 billion on October 27. 

During Dashain, there was a cash flow of Rs 76 billion from the banking system to the market. NRB Spokesperson Dr Gunakar Bhatta informed that on October 3, cash equivalent to Rs 620 billion was in circulation in the market, and by the October 26, it increased to Rs 696 billion.

During Dashain, NRB also provided the facility of issuing new bank notes.

When the general public withdrew money from banks during Dashain, the bank deposits decreased and cash in circulation increased. Spokesperson Bhatta said that the amount withdrawn for financial transactions on the occasion of the festival will gradually return to the banking system but it will take some more time.

Compared to Thursday, the total deposits of commercial banks increased by Rs 8 billion to Rs 5192 billion on Friday, while the deposits of development banks and finance companies also increased by Rs 2 billion to Rs 686 billion, as per NRB.

Despite the increase in deposits in the banking system, the credit flow has decreased. The total loan disbursed by BFIs stood at Rs 4973 billion as of Thursday, which decreased to Rs  4971 billion on Friday.

However, the loan disbursement has increased compared to mid-October. By mid-October, the total loan of banks was Rs 4952 billion. With the onset of November, loan disbursements from banks started to increase.

As the growth of deposits is higher than that of loans, the credit-deposit ratio (CD ratio) of banks also decreased. On Friday, the average CD ratio of banks remained at 81.71 percent. By mid-October, this ratio was 81.74 percent. According to the NRB’s provision, banks can provide loans by maintaining a CD ratio of up to 90 percent. They now have the capacity to provide additional loans of Rs 487 billion. With the increase in deposits and lending of banks, the interbank interest rate also increased rapidly. The average interest rate of interbank transactions, which has been around 2 percent for a long time, stood at 4.58 percent on Friday.