Kathmandu. As the second wave of corona virus infections intensifies, its effects are also being felt in the financial system. Bankers have said that the demand for new loans has been affected even though the flow of credit to banks and financial institutions has decreased.

Prakash Kumar Shrestha, head of the NRB's research department and chief economic adviser to the finance minister, says that liquidity should be understood as stable as the interbank rate has risen to less than 5 percent in recent days.

Earlier, when liquidity was high, the long-term short-term interest rate was less than 1 percent. Debt flows skyrocketed as the effects of the first wave of corona infection diminished. After that, the interbank rate also rose to close to 5 percent. Earlier, there was excess liquidity of up to Rs 250 billion in the financial system. At that time, the weighted average interbank rate was 0.2 percent. The interbank rate has also started rising as liquidity has been declining.

According to the NRB, the interbank rate had reached a record high of 4.60 percent in April last year. The interbank rate has risen due to lack of liquidity in the banks as a large amount of revenue went to the government account in mid-April. The interbank rate fell to 3.78 percent on Monday. The interbank rate fell last Sunday and Monday as government spending rose sharply. On the previous day, government expenditure (current expenditure) ranged from Rs 1 billion to Rs 3 billion daily, while on Sunday it was Rs 6.79 billion and on Monday it was Rs 8.54 billion.

This year alone, NRB has purchased foreign currency worth Rs 3.80 billion from the market. Experts say that the interbank rate has also declined as liquidity has returned to normal after the money was supplied to the market through the mentioned medium. According to NRB, there is about Rs 44 billion more liquidity in the financial system till Monday.