Cash Flow Starts Returning to Banking System after Dashain

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Cash Flow Starts Returning to Banking System after Dashain

November 8: Deposits withdrawn from banks and financial institutions before Dashain have started to return to the banking system.

According to the data of Nepal Rastra Bank, the total deposits of banks and financial institutions have reached Rs 5900 billion as of Sunday. The total deposits of banks had reached Rs 5915 billion in mid-October. After that, the deposits decreased to Rs 5868 billion by October 26. Post Dashain, deposits of Rs 32 billion have been added to the banking system.

In Dashain, a total of Rs 76 billion flowed into the market from the banking system. On October 3, cash equivalent to Rs 6020 billion was in circulation in the market, which increased to Rs 6096 billion by October 26.

Deposits in the bank have been increasing as remittance inflow has increased recently. Similarly, the bank's loan investment has also started to improve.

As of Sunday, the total credit disbursement of banks and financial institutions reached Rs 4977 billion. Loan disbursement increased by Rs 2 billion on Sunday compared to Saturday.

Credit flow of banks stood at Rs 4971 billion on October 26.

Nepal Bankers Association President Sunil KC said that there are signs of improvement in the internal condition of the economy along with the improvement in the external conditions.

As a result, bank deposits and credit flow have both improved compared to last year.

"This indicates that economic activities has started to improve in the domestic market," he said.

The Nepal Bankers' Association said deposits in commercial banks increased by Rs 121 billion as of Monday, while credit flow expanded by Rs 92 billion. During the same period of the last fiscal year, when bank deposits increased by Rs 84 billion, while credit flow expanded by Rs 47 billion.

As the growth of deposits is higher than that of credit flow, the credit-deposit ratio (CD ratio) of banks has decreased. On Sunday, the average CD ratio of banks remained at 81.53 per cent. In mid-October, it was 81.74 per cent. According to the provision of NRB, commercial banks must maintain a CD ratio of up to 90 per cent for credit disbursement. Accordingly, banks have loan disbursement capacity of about Rs 587 billion at present.

Along with the increase in deposits in the banks, the interbank interest rate has also started to decrease. The interbank interest rate, which was maintained at 4.58 per cent on October 27, dropped to 3.22 per cent on Sunday.

 

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