Nepal Breaking NewsBusinessLiquidity in the banking system is under strain, and interbank rates are...

Liquidity in the banking system is under strain, and interbank rates are rising

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In recent weeks, the banking system’s excess liquidity has sharply decreased. The government’s internal is putting a strain on market liquidity. Banks and financial institutions had around Rs 200 in liquidity at the same time last fiscal year. According to the NRB, the financial system has only around Rs 21 billion liquidity until Tuesday.

This figure includes the SLF facility obtained from the NRB by banks and financial institutions. After one week, the amount taken through SLF be returned. To maintain the loan-to-deposit-capital (CCD) ratio, BFIs must use the NRB’s Sustainable Liquidity Facility (SLF). Due to a of funds, banks have also stopped accepting inter-bank loans. On Tuesday, interbank interest rates increased to 4.7 percent.

Banks’ CCD ratios are under pressure as liquidity declines.

The average CCD ratio of banks, according to the NRB, was 80%. Banks disburse loans up to 85 percent of the loan-to-deposit ratio under the current directive.

On the other hand, of the Bankers’ Association Bhuvan Dahal stated that banks and financial institutions have sufficient funds for the flow of credit, despite the fact that bank liquidity has decreased for the time being.

He claimed that in the last two to three weeks, banks have invested around Rs 60 billion in government securities, resulting in a liquidity shortage.

Because government spending is expected to rise in the final month of the current fiscal year, this problem will be resolved soon.

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