Liquidity has not improved, both loans and deposits have declined

Liquidity of Nepal is Not Increasing

The liquidity position in the banking sector has not much improved despite the fact that there are just two months remaining in the fiscal year. Credit and deposits in the banking system are continuing to shrink, in contrast to the expectations that liquidity conditions will improve as government expenditure increases at the conclusion of the fiscal year.

When looking at the statistics for the most recent month, which covers the month of April, it can be seen that both deposits and loans have seen a reduction over that time period. As a consequence of this, the total deposits held by commercial banks were lower by around 19 billion rupees in the middle of April compared to the same time last year. Midway through the month of April, the total deposits held in banking institutions amounted to Rs 4.389 trillion. As of the middle of April, it had dropped to 4.37 trillion rupees. Within the past month, deposits at six of the 27 commercial banks in the country have experienced a drop.

In a manner parallel, the flow of credit provided by commercial banks has decreased by Rs. 6 billion over the course of the last month. In April, the overall credit flow provided by commercial banks was 4.197 trillion rupees. Since April of last year, the whole loan flow has been brought down to 41.91 trillion rupees. The flow of credit at fourteen different banks has decreased during the past month.