Commercial banks still unable to attract deposits in accordance to their increase in profits; will increase in government expenditure help?

Most of the commercial banks have presented an attractive balance sheet with lucrative profit increase. In spite of the massive capital increment, the banks have been able to achieve such growth in profit—ultimately benefitting their shareholders and the banks themselves. This is all because of the aggressive lending made by the banks in the beginning of this fiscal year. As a result, BFIs have faced a crisis of investable funds lately. To overcome this,  banks have been coming up with varieties of schemes to attract deposits and solve the problem of the ongoing liquidity crunch. However, seeing the financial report of 3^rd quarter of FY 2073/74, it can be noticed that banks are still unable to raise their deposits by a significant percentage as compared to the second quarter. Although their net profits have increased decently, such case was not seen in deposits.

In 'ooo Rs.

	Q3 FY2073/74	Q2 FY2073/74	Growth %
Deposits	1,952,213,755	1,909,491,894	2.24%
Loans & Advances	‎1,703,369,330	‎1,583,967,170	7.54%
Avg. Net Profit	1,124,334	750,035	49.90%

Where the average net profit of commercial banks has surged by almost 50% from second quarter to the third quarter of FY 2073/74, rise of only 2.24% is seen in the total deposit collection. The loans have extended by 7.54% in this review period. In spite of attractive interest rates in both savings and fixed deposits, the deposit collection has not been satisfactory in the 3^rd quarter. Since interest income is the primary source of income for banks, this meager growth in deposit can affect their net profit in the coming days. However, most commercial banks have increased the interest rate in savings only from the last week of Chaitra 2073, so increased growth can be expected in deposits in the fourth quarter. Going forward, increase in deposits in the fourth quarter in an increased rate should help commercial banks achieve more profit. Increase in government expenditure due to election and increase in developmental activities should help banks gather more deposits. - Ujjwal Bohara Also See:

• Nepal Government's Budgeted Revenue & Expenditure (till Chaitra 2073)
• Nepal Government's Capital Expenditure (till Chaitra 2073)