BFIs reduce credit flow despite increase in deposits


June 8, 2022


BFIs reduce credit flow despite increase in deposits

Nepal Rastra Bank (File photo)

KATHMANDU: Banks, which are under pressure to keep the credit-deposit (CD) ratio at 90 percent by mid-July, are pursuing a strategy of reducing credit flow despite the increase in deposits.

According to the Nepal Bankers’ Association, credit flow has shrunk despite the increase in deposits of banks and financial institutions (BFIs).

Even though deposits in commercial banks increased by Rs 7 billion in the first week of June, credit flow declined by Rs 2 billion.

BFIs that witnessed decline in deposits due to the local elections are significantly receiving deposits after May 15. Due to this, the deposits have increased by Rs 20 billion by June 3.

Meanwhile, banks’ foreign exchange deposits have also increased by Rs 2 billion in the last week.

Despite the increase in deposits, banks have adopted a strategy of reducing credit flow. BFIs have been blocking the flow of new loans and focusing only on recovery, of late.

Banks have almost stopped the flow of credit as the CD ratio of banks has exceeded the target set by the National Bank.

According to the association, the average CD ratio of commercial banks is 90.32 percent as of June 3.