Low deposit collection brings relief to BFIs

- POST REPORT, Kathmandu

Oct 5, 2014-

At a time when the banking sector is facing liquidity surplus, deposit collections of banks and financial institutions has decreased by 0.6 percent (Rs 7.87 billion) in the first month of the current fiscal year, a central bank report said.

The downturn in the deposit collection is expected to have helped ease the surplus liquidity, with the Nepal Rastra Bank (NRB) mopping up liquidity from the banking sector through reverse repo and ‘deposit collection’ instruments. In the review period, deposit mobilisation of commercial banks and development banks decreased by 0.1 percent and 2.3 percent respectively while that of finance companies increased by 1.5 percent.

NRB spokesperson Manamohan Kumar Shrestha said that low interest rate offered by banks and financial institutions may be reasons behind decrease in deposit collection as investors moved to share market and other investment avenues. Interest rate for fixed deposit for a year has been around 6 percent at the moment among the commercial banks.

“Another reason could be slowed remittance growth in the first month as the remittance is one of the sources of deposit mobilisation of BFIs,” said Shrestha. According to the central bank report, remittance inflow during the first month of the current fiscal year increased by just 0.8 percent to Rs. 42.19 billion compared to 23.8 percent rise in the same period of the last fiscal.

During the review period, lending, however, increased marginally by 0.9 percent to Rs. 12.02 billion compared to a marginal increment of Rs. 0.48 billion in the corresponding period last fiscal.

 Lending by commercial banks and finance companies increased by 1.5 percent and 2.0 percent respectively while that of development banks decreased by 1.3 percent during the review period this fiscal.

 Amid optimism in the market along with the new government presenting the budget for the current fiscal year, BFI’s lending to the manufacturing sector surged to Rs 3.55 billion from mere Rs 320 million during the same period last fiscal, according to the report.

Credit to the agriculture sector, however, decreased by Rs 350 million as against an increase of Rs 70 million during the review period.

Shrestha said the slow growth in commercial farming could be the reason behind the decline in credit to the agricultural sector.

Published: 06-10-2014 09:59

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