BFIs’ deposit mobilisation up 7.7pc

KATHMANDU, MAR 17 - Although banks and financial institutions (BFIs) have slashed interest rates on deposits, it has not deterred depositors from parking their money in banks . The BFIs saw a 7.7 percent growth in their deposit mobilisation in the first seven months of the fiscal year.

The Nepal Rastra bank’s (NRB) latest macro-economic report shows individuals’ deposits in BFIs increased by 10.2 percent in seven-month period to reach Rs 718.74 billion. The growth rate was 3 percent in the same period a year ago.

Bankers say the rise in BFIs’ deposit mobilisation is mainly due to the growth in remittance income along with problems in cooperatives. “With savings and credit cooperatives getting problematic, depositors are diverting their money back to BFIs,” said a banker. Remittance inflow grew 38 percent in the seven-month period.

In the review period, the interest rate on deposits has declined by 2 percentage points. The average interest rate on deposits as of the seventh month of the fiscal year stands at 4.61 percent, against 5.13 percent last year.

However, the general public seemed to have found parking money in BFIs the best option as real estate recovery is still slow, while the capital market, despite showing some spark of late, is yet to infuse confidence in investors.

Bankers say there are not many options for the middle-class people who generally deposit up to Rs 1 million.

“There are no other options for the depositors to invest by withdrawing money from BFIs,” the banker said.

Deposits from non-government organisations surged 11.4 percent, while those from insurance companies rose 10.5 percent.

However, deposits from Employees Provident Fund (EPF) have decreased 1.4 percent, and those from Citizen Investment Trust declined 7.7 percent. Deposits put by local government agencies also decreased 34.4 percent.

Over the review period, credit growth remained 8 percent, which was at 12 percent in the last fiscal year. Bankers, however, said credit demand has been growing of late. “Hydropower and hotel sectors are encouragingly demanding more loans,” the banker said.

Source: The Kathmandu Post