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The Commercial Banks Are Under Pressure Due To A Lack Of Available Funds And Are Likely To Boost Interest Rates More After Dashain.

The Commercial Banks Are Under Pressure Due To A Lack Of Available Funds And Are Likely To Boost Interest Rates More After Dashain.

Banks are expected to hike interest rates on loans after the middle of October, citing a lack in loanable funds available to them as a result of an excessive increase in imports and a delayed inflow of remittance amounts in recent months.

According to bankers, the country’s financial system has been experiencing a shortfall of money supply, which has made it difficult to make loan payments. According to Narayan Das Manandhar, the chief executive officer of Prime Commercial Bank, “the shortfall has increased even further since a number of banks have begun aggressive lending at a time when spending out of the state government is slow.”

As of the middle of September, domestic banks had fixed the interest rate at an average of 4.76 percent, while the interest rate on loans was 8.48 percent on the average. Interest rates on savings and loans have increased by 0.11 point percent and 0.05 point percent, respectively, when compared to the middle of July this year.

According to figures kept by the Nepal Rastra Bank (NRB), commercial banks had deposits totaling Rs 424.90 billion as of last week, while they made loans totaling Rs 396.10 billion during the same period. More than Rs 70 billion has been poured into the country’s financial sector in recent weeks, according to the central bank. However, it has fallen short of resolving the current challenge of liquidity shortage.

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According to bankers, the money market crisis began to manifest itself in mid-July, at the start of the current fiscal year, mostly as a result of the National Reserve Board implementing a rule requiring a credit-deposit ratio of 90 percent. However, the situation has deteriorated as a result of rising imports and a slowdown in remittance earnings.

According to the National Reserve Bank’s data, remittance inflows declined by 18.1 percent to Rs 75.96 billion between mid-July and mid-August this year, compared to a rise of 23.0 percent during the same time the previous year. A similar surge in merchandise imports, which rose 75.7 percent to Rs 150.73 billion, led to a large trade deficit of Rs 129.99 million that was borne by the country’s exporters.

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