Deposit Collection of Commercial Banks Declines

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Deposit Collection of Commercial Banks Declines

April 27: With the start of the Nepali New Year, deposit collection of banking institutions has been affected due to low interest rate. In the first two weeks of Baishakh (mid-April to April end), deposit collection of 27 commercial banks has continuously declined.

Bankers say that customers may have shifted towards development banks, finance companies and cooperatives because they offer attractive interest rate than commercial banks.

According to the data published by Nepal Banker's Association on Monday, April 26, deposit collection has declined by Rs 392 billion in the first week of Baishakh and further declined by Rs 5 billion in the second week.

The credit flow which was continuously increasing until late last year declined by Rs 8 billion and was limited to Rs 356 billion. However, there was an increment in the second week. The credit flow increased by Rs 17 billion to Rs 358 billion.

Ganeshraj Pokhrel, CEO of Citizens Bank International, said the relocation of customers to other group of banks has brought a decline in the deposit collection. “Customers have not withdrawn from banks to buy food items fearing food shortage. The facility of digital banking allows them to do so at anytime. Many development banks, cooperative are offering attractive interest rate which has lured customers towards them,” he adds.

Most of the banks raised the CCD ratio to 85 percent as prescribed by the Nepal Rastra Bank and they have also increased the interest rate on deposit to 8.5 percent. However, CCD ratio of most of the commercial banks is still low and they haven’t increased the interest rate either. That's why it is assumed deposits have been shifted to developments banks.

According to NRB, CCD ratio of overall commercial banks is at 78.77 percent. "Average CCD ratio is 77%. If the government spends development budget in the fourth quarter, money is expected to come into banking system but it is feared to be affected by COVID-19  as the businesses affected by the second wave might seek for waivers," said Pokhrel. That's why profit of the banking institutions might not be as good as expected in the fourth quarter.

                                                                                                                                                              

 

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