Lending leaps, deposit slows down; Liquidity surplus isnt resolved:Bankers

ShareSansar, September 19:

Unlike in the previous weeks, deposit mobilization of the commercial banks has gone down in the first week of this month in comparison to their lending.

 According to the data compiled by Nepal Bankers Association (NBA), the total deposit of 30 commercial banks of the country went up by Rs 3 arba to reach Rs 1,202 arba while their lending rose by Rs 7 arba. The banks total lending has reached to Rs 923 arba as of September 5.

The banks’ deposit and loan mobilization growth was equal in the last week of the August. Their deposit and loan mobilization went up by Rs 4 arba. The deposit had reached to Rs 1199 arba as of August 29, up from Rs 1195 arba in the previous week. Likewise, the total lending of the bank rose to Rs 916 arba in the last week, up by Rs 912 arba in the previous week.

Bankers attribute the slowdown in the deposit mobilization to the nearing festive seasons.

“Since people start withdrawing their deposit in the festival season, the deposit figure has gone down,” said a banker. “The loan seemed to go up as the traders take loans from the banks at this time to import the goods and other commodities item to hoard the stocks for the festival season.”

The banker, however, said that there were no demands for the investment from the manufacturing or other infrastructure projects in recent times.

 “The investors are still in wait-and-watch mode to kick start their project. Unless the investment-friendly climate is made, the liquidity surplus problem in the banking system will remain as it is,” the banker warned.

The excess liquidity has hit the income of the banks with the interest rates on deposits and lending going down as well as the rate of instruments such as government securities plunging below one per cent.

As the banks are grappling with the liquidity surplus, the central regulatory bank has absorbed Rs 30 arba from the banking system through the new open market operation instrument call ‘Term Deposit’. The latest deposit call of Rs 10 arba held on Tuesday was oversubscribed by 2.5 times.

In a bid to mop up the excess liquidity from the banking system, Nepal Rastra Bank (NRB) has introduced the instrument call ‘term deposit’ in the monetary policy of fiscal year 2071/72.

Unlike reverse repo which the central bank conducts regularly and has a maturity period of only one week, term deposit has a maturity period of three months and are held keeping in view the liquidity situation in the system.

Table:Deposit and Lending of the Commercial Banks ( Rs. in Billions)