CIT seeks quotations from commercial banks for FD

ShareSansar, December 6:

In yet another sign of surplus liquidity in the capital market, the state-run Citizen Investment Trust has asked commercial banks to submit sealed quotation proposing the interest rate for a fixed deposit of Rs 3 arba that the Trust wants to make.

Issuing a notice yesterday, CIT has sought two quotations from each of the interested commercial banks for the fixed deposit for the periods of six months and one year, respectively.

Established in 1990 under the special act called the Citizen Investment Trust Act, CIT’s areas of activities include the operation of retirement schemes, unit trust schemes and the capital market service.

It would be interesting to see how the commercial bank will respond to the notice as they are already slashing their interest rate as they struggle to find enough of proper investment opportunity.

This also comes two days after Nepal Rastra Bank undertook a reverse repo for the sixth time in the current fiscal year to mob up excess liquidity in the market.

The sixth reverse repo worth Rs 19.4 arba was held as the loanable amount with the commercial banks reached around Rs 75 arba.

NRB has already hold reverse repos worth Rs 35 billion between mid-September to mid-October besides an outright purchase auction for securities worth Rs 8.5 billion.

It may be noted here that though the lowered bank interest rates due to liquidity situation is good news for the share market as a chunk of the money from the banking system will be go into the market, there is a risk of large sum of money going into not properly regulated financial institutions there by risking the economy and people’s deposit.

Such a situation can also trigger inflation besides affecting the entire financial sector.