September 13: Bank deposits and credit flow continued to improve in the second week of September as well. It has been found that the new schemes of banks to attract deposits and the upcoming festivals have had a positive impact on bank deposits and loan disbursement.
According to the Nepal Bankers Association, in the second week of September, bank deposits increased by Rs 8 billion, while credit flow also increased by Rs 7 billion. The total deposits of commercial banks which stood at Rs 4437 billion on September 2 climbed to Rs 4444 biillion on September 9. Although the bank deposits had decreased in the third week of August, it has been continuously rising since then. From mid-August to mid-September, deposits of Rs 12 billion have been added in the banking system.
The upcoming festive season and new deposit schemes introduced by banks have been considered as the main reasons for the increase in bank deposits. Lately, banks have announced term deposit schemes for a period of 21 years, giving up to 10 times returns of the initial deposit. Similarly, bankers claim that remittance inflow has increased as Dashain, the biggest festival of Nepal, is fast approaching. This has had a positive impact in the domestic market and the financial activities have also increased. Along with the increase in deposits, banks have also started to increase loan disbursement.
According to the association, the total loan disbursement of banks was Rs 4181 billion on September 2, which reached Rs 4188 biillion by September 9. From mid-August to mid-September, credit flow of banks has increased by Rs 12 billion.
Along with the increase in loans/deposits of banks, the credit-deposit ratio (CD ratio) has also improved. According to the association, the average CD ratio of commercial banks remained at 88.36 percent on September 9. Earlier, the CD ratio was 88.25 percent on September 2 and 88.42 percent on August 26. According to the instructions of Nepal Rastra Bank, banks should maintain CD ratio within 90 percent. Banks that are unable to maintain this ratio will be fined for the excess amount.