June 8: Banks, which are under pressure to keep the credit-to-deposit (CD) ratio at 90 percent by mid-July, are pursuing a strategy of reducing credit flow despite an increase in deposit collection.

According to the Nepal Bankers Association, credit flow has shrunk despite the increase in deposit collection of banks and financial institutions. Although deposit collection of commercial banks increased by Rs 7 billion in the third week of June, credit flow declined by Rs 2 billion.

 Bank deposits that were drawn out of the banking system due to the local elections have started returning to the banks.

Despite the increase in deposit collection, banks have adopted a strategy of reducing credit flow. Lately, banks have been blocking the flow of new loans and focusing only on recovery.

According to the association, the credit flow of banks has decreased by Rs 2 billion in the third week of May as compared to the second week.

Banks have almost stopped the flow of credit as the CD ratio of banks has exceeded the target set by the Nepal Rastra Bank (NRB) due to lack of liquidity. NRB has set a deadline of July for banks and financial institutions to bring the CD ratio within 90 percent.

According to the association, the average CD ratio of commercial banks is 90.32 percent as of June 30.

 Meanwhile, an agreement has been reached between the Nepal Bankers Association and FinTelect Advisory Services to provide expert services on asset laundering prevention and financial crime compliance. The agreement was signed by Anil Kumar Upadhyay, president of the association and Shirish Pathak, managing director of FinTelect. As per the agreement, FinTelect will conduct webinars and workshops for Nepali bankers on anti-money laundering issue.

 Similarly, it will conduct policy research in collaboration with both the organizations and also give necessary suggestions to the regulator.

"FinTelect, through its highly knowledgeable resources and global advisors, will help Nepal's banking industry effectively and efficiently fight financial investment in money laundering and terrorism," said Managing Director Pathak.

"This cooperation will help increase the knowledge, skills, efficiency and productivity of the employees in the banking sector, especially in the field of anti-money laundering," said Upadhyaya.