The total deposit amount handled by 31 commercial banks in the country has crossed Rs one trillion as of this week.
With the closing of the last fiscal year, class ‘A’ banks seem to have crossed the monetary authority’s estimation of 15 per cent increment.
The amount of deposits with commercial banks by the end of last week of the last fiscal year stands at Rs 1002 billion which is a growth of almost 16 per cent in the last one year.
Deposits parked at commercial banks in the corresponding period of the previous year stood at Rs 862 billion.
Though the financial sector briefly witnessed liquidity crunch in the first few months of 2013, the increased capital expenditure and strong dollar induced increased remittance and conversion of dollar deposits to Nepali rupee accounts which also drew money to the banks.
“Near the end of the last fiscal year, a large number of government funds were released that flushed the banking sector with deposits, hence deposits increased substantially in the third quarter of the last fiscal,” pointed out vice president of Nepal Bankers’ Association Upendra Poudyal.
Since the first few months into the last fiscal year, deposit growth, especially in commercial banks, was slow-paced.
The average rate of deposit growth in commercial banks remained at 3.1 per cent.
The liquidity crunch had even pushed the inter-bank lending rate to as high as 6.8 per cent in mid-April.
In mid-February too, interbank lending rate was at 6.7 per cent. It then subsided but once again in the first week of March it reached 5.8 per cent — moving in tandem with the liquidity situation of banks.
Higher interbank rate points out the acute need of cash for banks and vice versa.
Most importantly, banks themselves realised that deposits were flying to development banks and finance companies due to the reduced interest offered for deposits by commercial banks.
Of late, commercial banks are also offering interest rates as high as eight per cent for fixed deposits and four to six per cent on savings deposits.
“Interest rate could be somehow responsible for attracting individual deposits but it is difficult to single it out as a major reason for growing deposits,” pointed out Poudyal who is also the chief executive officer of NMB Bank.
Moreover, in the past one year, the exchange rate of the US dollar has appreciated by almost eight per cent. “The surge in the value of one unit of the dollar has led to dollar account holders converting their dollar balance in their accounts into local currency, which has increased the amount of deposits in Nepali currency,” informed Poudyal.
Also, due to the increment in the value of the dollar in terms of Nepali currency, remittance income of Nepal increased to Rs 388.4 billion by mid-June.
The amount recorded by the central bank is money remitted through formal banking channels, thus, the money reaches bank deposits.
Though the amount of increased deposit is good news for the banking sector, in the last couple of weeks lending has crawled up in a snail-like speed.
In the first two weeks of July, lending made by commercial banks increased by Rs two billion as banks are apprehensive about giving loans in the last quarter due to provisioning requirements.
Src: THT
With the closing of the last fiscal year, class ‘A’ banks seem to have crossed the monetary authority’s estimation of 15 per cent increment.
The amount of deposits with commercial banks by the end of last week of the last fiscal year stands at Rs 1002 billion which is a growth of almost 16 per cent in the last one year.
Deposits parked at commercial banks in the corresponding period of the previous year stood at Rs 862 billion.
Though the financial sector briefly witnessed liquidity crunch in the first few months of 2013, the increased capital expenditure and strong dollar induced increased remittance and conversion of dollar deposits to Nepali rupee accounts which also drew money to the banks.
“Near the end of the last fiscal year, a large number of government funds were released that flushed the banking sector with deposits, hence deposits increased substantially in the third quarter of the last fiscal,” pointed out vice president of Nepal Bankers’ Association Upendra Poudyal.
Since the first few months into the last fiscal year, deposit growth, especially in commercial banks, was slow-paced.
The average rate of deposit growth in commercial banks remained at 3.1 per cent.
The liquidity crunch had even pushed the inter-bank lending rate to as high as 6.8 per cent in mid-April.
In mid-February too, interbank lending rate was at 6.7 per cent. It then subsided but once again in the first week of March it reached 5.8 per cent — moving in tandem with the liquidity situation of banks.
Higher interbank rate points out the acute need of cash for banks and vice versa.
Most importantly, banks themselves realised that deposits were flying to development banks and finance companies due to the reduced interest offered for deposits by commercial banks.
Of late, commercial banks are also offering interest rates as high as eight per cent for fixed deposits and four to six per cent on savings deposits.
“Interest rate could be somehow responsible for attracting individual deposits but it is difficult to single it out as a major reason for growing deposits,” pointed out Poudyal who is also the chief executive officer of NMB Bank.
Moreover, in the past one year, the exchange rate of the US dollar has appreciated by almost eight per cent. “The surge in the value of one unit of the dollar has led to dollar account holders converting their dollar balance in their accounts into local currency, which has increased the amount of deposits in Nepali currency,” informed Poudyal.
Also, due to the increment in the value of the dollar in terms of Nepali currency, remittance income of Nepal increased to Rs 388.4 billion by mid-June.
The amount recorded by the central bank is money remitted through formal banking channels, thus, the money reaches bank deposits.
Though the amount of increased deposit is good news for the banking sector, in the last couple of weeks lending has crawled up in a snail-like speed.
In the first two weeks of July, lending made by commercial banks increased by Rs two billion as banks are apprehensive about giving loans in the last quarter due to provisioning requirements.
Src: THT
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