Banks still have room for lending
KATHMANDU, May 25:
There is still scope for the commercial banks to expand their lending portfolio as industrial average of credit to deposit (CD) ratio is still within the limit set by the regulatory body.
According to the unaudited third quarterly report of the current fiscal year, the average CD ratio of the banks stands at 76.2 per cent which is almost 10 per cent below the limit set by Nepal Rastra Bank.
The average CD ratio of 29 commercial banks —excluding Nepal Bank and Rastriya Banijya Bank that are under special consideration due to ongoing financial reconstruction programme — also stand at 71.7 per cent. However, if the newly opened five commercial banks that have yet to complete one year of operation are excluded then the average CD ratio of the commercial banks stands at 80.2 per cent.
Among the 31 commercial banks excluding Nepal Bank and Rastriya Banijya Bank, the eight commercial bank’s CD ratio is less than industrial average, two commercial banks have almost equivalent to the industrial average while 21 commercial banks have higher CD ratio then the industrial average.
The two state owned commercial banks enjoy strong goodwill from the depositors so that their deposit collection is substantial in comparison to their lending. Nepal Bank’s deposit base alone is larger than Rs 42 billion lowering its CD ratio. The industrial average CD ratio of the class ‘A’ banks stood at 81 per cent in the second quarter of the current fiscal year.
According to third quarter’s financials, seven commercial banks have to either reduce their lending or increase their deposits to meet the central bank’s requirement of reducing CD ratio to 85 per cent by next fiscal year.
The central bank had directed the banks and financial institutions that have CD ratio exceeding to 85 per cent by the end of this fiscal year and 80 per cent by the end of next fiscal year’s second quarter — that is -mid January 2012.
In order to monitor the aggressive lending of the banks, back is April 2010, the central bank directed the banks to disclose CD ratio in their unaudited quarterly reports as well.
The central bank had brought the regulation directing to maintain CD ratio within 95 per cent in order to supervise their credit exposure to the real estate back in December 2009. The financial sector that had gone through severe liquidity crunch brought on by over exposure to the realty loans as some of the commercial banks’ CD ratio had even exceeded 100 per cent. “If it had been left unchecked it could have brought systemic failure,” said central bank governor.
Source: THT
There is still scope for the commercial banks to expand their lending portfolio as industrial average of credit to deposit (CD) ratio is still within the limit set by the regulatory body.
According to the unaudited third quarterly report of the current fiscal year, the average CD ratio of the banks stands at 76.2 per cent which is almost 10 per cent below the limit set by Nepal Rastra Bank.
The average CD ratio of 29 commercial banks —excluding Nepal Bank and Rastriya Banijya Bank that are under special consideration due to ongoing financial reconstruction programme — also stand at 71.7 per cent. However, if the newly opened five commercial banks that have yet to complete one year of operation are excluded then the average CD ratio of the commercial banks stands at 80.2 per cent.
Among the 31 commercial banks excluding Nepal Bank and Rastriya Banijya Bank, the eight commercial bank’s CD ratio is less than industrial average, two commercial banks have almost equivalent to the industrial average while 21 commercial banks have higher CD ratio then the industrial average.
The two state owned commercial banks enjoy strong goodwill from the depositors so that their deposit collection is substantial in comparison to their lending. Nepal Bank’s deposit base alone is larger than Rs 42 billion lowering its CD ratio. The industrial average CD ratio of the class ‘A’ banks stood at 81 per cent in the second quarter of the current fiscal year.
According to third quarter’s financials, seven commercial banks have to either reduce their lending or increase their deposits to meet the central bank’s requirement of reducing CD ratio to 85 per cent by next fiscal year.
The central bank had directed the banks and financial institutions that have CD ratio exceeding to 85 per cent by the end of this fiscal year and 80 per cent by the end of next fiscal year’s second quarter — that is -mid January 2012.
In order to monitor the aggressive lending of the banks, back is April 2010, the central bank directed the banks to disclose CD ratio in their unaudited quarterly reports as well.
The central bank had brought the regulation directing to maintain CD ratio within 95 per cent in order to supervise their credit exposure to the real estate back in December 2009. The financial sector that had gone through severe liquidity crunch brought on by over exposure to the realty loans as some of the commercial banks’ CD ratio had even exceeded 100 per cent. “If it had been left unchecked it could have brought systemic failure,” said central bank governor.
Source: THT
