August 3: Bank deposits have declined by Rs 91 billion in a period of just two weeks. According to the data released by the Nepal Bankers Association on Tuesday, both the bank deposits and credit disbursement of commercial banks have declined since mid-July.

According to the association, their total deposits were Rs 45.41 trillion in mid-June, which dropped to Rs 44.50 trillion by July 29.

According to the association, deposit collection of commercial banks decreased by Rs 64 billion in the second week of July and by Rs 28 billion in the third week. Prior to that, the deposits of banks had increased by about Rs 1.5 billion till mid-July. By mid-June, total deposits of banks stood at Rs 44 trillion, which reached Rs 45.41 trillion by mid-July.

Spokesperson of Nepal Rastra Bank Dr. Gunakar Bhatt says, “After mid-July, a large amount of money was deducted from the banking system when Nepal Oil Corporation paid the amount of oil purchase to the Indian Oil Corporation (IOC). The deposits of commercial banks decreased when the Nepal Oil Corporation paid the amount to the Indian Oil Corporation (IOC) in the third week of July. Deposits may also have declined as the government issued cheques to pay builders by mid-July.” He believes that this amount will get back to the banking system gradually.

In the third week of July, NOC took a loan from the government and paid Rs 16.80 billion to the IOC. Bhatta estimates that when NOC withdrew a large amount of money at once, the deposits of the commercial banks decreased significantly. Similarly, after the start of the new fiscal year, some of the budgets that could not be spent by the local bodies were returned to the state coffers, resulting in the decline in the deposits of the commercial banks. Along with the deposits, the investment of the banks has also decreased. As per the association, since mid-July, the banks' credit flow decreased by Rs 11 billion.

By mid-July, the total credit disbursement of commercial banks was Rs 41.75 trillion, which decreased to Rs 41.64 trillion as of July 29. Due to the lack of liquidity, banks recently stopped loan investment and emphasized on recovery. According to the association, the average credit-to-deposit ratio of banks remained at 87.98 percent on July 29.