FIs rush to NRB for cash
KATHMANDU, JUN 18 -
More than a dozen financial institutions (FIs) have applied to Nepal Rastra Bank (NRB) for cash under a special refinancing measure amid a continuing tight liquidity situation. The FIs have rushed to NRB to prevent an acute liquidity shortage in case of large withdrawals. A total of 14 development banks and finance companies have applied to the central bank for refinancing as of Friday.
“Four out of them have got approval for refinancing worth Rs 400 million,” said Bhaskarmani Gyawali, spokesperson of the central bank. The FIs facing an acute liquidity crunch were engaged in intense lobbying with NRB officials on Friday for early availability of refinancing.
NRB had opened the special refinancing measure to address the liquidity crunch last week admitting that the existing refinancing measures were inadequate. Under the special refinancing, banks and financial institutions (BFIs) can get refinancing of up to 60 percent of their core capital for 120 days.
They can get refinancing of up to 80 percent of good loans put up as collateral. As per the usual refinancing measure, they could get refinancing of up to 40 percent of the core capital for six months. BFIs can get refinancing under both measures.
A total of 20 BFIs have applied for refinancing under both the usual and special measures worth Rs 1 billion so far, according to NRB. Six commercial banks have applied for refinancing under the usual refinancing measures. A few days ago, three banks got approval for refinancing worth Rs 150 million. Finance companies are in greater trouble than commercial banks nowadays. They blame the central bank’s alleged decision to not put its deposits in B and C class FIs.
This has resulted in withdrawals of deposits by other institutional depositors and individual depositors too.
After the central bank and a number of other institutional depositors withdrew their deposits from Vibor Development Bank and People’s Finance, they landed in trouble. Their failure to manage liquidity properly is another big flaw behind the situation they went through.
“Finance companies as a whole are facing a liquidity crunch,” admitted Rajendra Man Shakya, president of the Nepal Finance Companies Association. “A total of 22 finance companies have rushed to the central bank for funds under the special refinancing measure as of Friday.”
Until the last fiscal year, growth of deposits in commercial banks was sluggish while the growth in B and C financial institutions was relatively robust. Deposits in development banks soared 63 percent to Rs 77 billion and finance companies saw their deposits grow 35.08 percent to Rs 77 billion in the last fiscal year. However, commercial banks witnessed a mere 13.69 percent growth in their deposits to Rs 631 billion, according to NRB.
Now the situation has reversed, and old and better commercial banks are wooing depositors in recent days out of fear that B and C class FIs could land in trouble.
Shakya admitted that finance companies were witnessing withdrawals of 70-80 percent of their deposits while only around 20 percent deposits were coming in recent days.
Development banks, however, are not in a hurry to obtain special refinancing from the central bank. “I don’t have information about any development bank applying for special refinancing from NRB,” said Jhapat Bohora, president of the Development Bankers Association. According to him, mainly capital-based development banks went through a liquidity crunch as they were heavily dependent on institutional depositors. “It is a lesson for us that we have to increase the general public’s deposits,” he said.
Source: Kantipur
More than a dozen financial institutions (FIs) have applied to Nepal Rastra Bank (NRB) for cash under a special refinancing measure amid a continuing tight liquidity situation. The FIs have rushed to NRB to prevent an acute liquidity shortage in case of large withdrawals. A total of 14 development banks and finance companies have applied to the central bank for refinancing as of Friday.
“Four out of them have got approval for refinancing worth Rs 400 million,” said Bhaskarmani Gyawali, spokesperson of the central bank. The FIs facing an acute liquidity crunch were engaged in intense lobbying with NRB officials on Friday for early availability of refinancing.
NRB had opened the special refinancing measure to address the liquidity crunch last week admitting that the existing refinancing measures were inadequate. Under the special refinancing, banks and financial institutions (BFIs) can get refinancing of up to 60 percent of their core capital for 120 days.
They can get refinancing of up to 80 percent of good loans put up as collateral. As per the usual refinancing measure, they could get refinancing of up to 40 percent of the core capital for six months. BFIs can get refinancing under both measures.
A total of 20 BFIs have applied for refinancing under both the usual and special measures worth Rs 1 billion so far, according to NRB. Six commercial banks have applied for refinancing under the usual refinancing measures. A few days ago, three banks got approval for refinancing worth Rs 150 million. Finance companies are in greater trouble than commercial banks nowadays. They blame the central bank’s alleged decision to not put its deposits in B and C class FIs.
This has resulted in withdrawals of deposits by other institutional depositors and individual depositors too.
After the central bank and a number of other institutional depositors withdrew their deposits from Vibor Development Bank and People’s Finance, they landed in trouble. Their failure to manage liquidity properly is another big flaw behind the situation they went through.
“Finance companies as a whole are facing a liquidity crunch,” admitted Rajendra Man Shakya, president of the Nepal Finance Companies Association. “A total of 22 finance companies have rushed to the central bank for funds under the special refinancing measure as of Friday.”
Until the last fiscal year, growth of deposits in commercial banks was sluggish while the growth in B and C financial institutions was relatively robust. Deposits in development banks soared 63 percent to Rs 77 billion and finance companies saw their deposits grow 35.08 percent to Rs 77 billion in the last fiscal year. However, commercial banks witnessed a mere 13.69 percent growth in their deposits to Rs 631 billion, according to NRB.
Now the situation has reversed, and old and better commercial banks are wooing depositors in recent days out of fear that B and C class FIs could land in trouble.
Shakya admitted that finance companies were witnessing withdrawals of 70-80 percent of their deposits while only around 20 percent deposits were coming in recent days.
Development banks, however, are not in a hurry to obtain special refinancing from the central bank. “I don’t have information about any development bank applying for special refinancing from NRB,” said Jhapat Bohora, president of the Development Bankers Association. According to him, mainly capital-based development banks went through a liquidity crunch as they were heavily dependent on institutional depositors. “It is a lesson for us that we have to increase the general public’s deposits,” he said.
Source: Kantipur
