Kathmandu: Banks and financial institutions, which have been facing liquidity problems for a long time, have gradually started reducing their investment in short-term instruments issued by the National Bank for liquidity management. In particular, banks that have been investing in deposit collection instruments and permanent deposit facilities (SDFs) issued by the National Bank for liquidity management have been gradually reducing such investments recently.

As the demand for loans has started to increase, banks have gradually reduced their investment in short-term instruments. There have been less applications for deposit collection instruments than demand twice since the beginning of Chaitra. When the central bank tried to withdraw Rs 40 billion through the deposit collection instrument on Chaitra 3, banks and financial institutions applied for only Rs 15.2 billion. Also, when the central bank tried to withdraw Rs 25 billion through the same instrument on Chaitra 2, they applied for only Rs 9.4 billion.

Some time ago, when the central bank issued a deposit collection instrument worth Rs 100.5 billion, it received more applications than demand. Recently, even when issuing instruments of small amounts, there have been less applications than demand. This indicates an improvement in the credit flow of banks in recent times.

Similarly, banks and financial institutions have also been reducing the 3-day fixed deposit facility (SDF). Banks and financial institutions, which had taken up to 98 billion SDF facility in a single day in Falgun, have taken this facility worth the most, worth 61.4 billion rupees, on the 5th after the start of Chaitra.

Experts say that demand for loans has started to come as banks' investment in short-term instruments has started to decrease. Bankers expect that credit flow will gradually increase due to the continuously decreasing interest rates and the government's continuous request to increase investment and commitment to an investment-friendly environment. Bankers have said that there have been some signs of improvement in credit flow recently.

 6 trillion  more investable amount in banks and financial institutions

Currently, banks and financial institutions have more than 6 trillion investable amount, according to the data of the National Bank. According to the National Bank, there are currently a total of 67 trillion rupees in deposits in the financial system. During this period, banks have invested 54 trillion rupees in loans. There is a provision that allows banks to invest up to 90 percent of deposits in loans. Based on this, banks and financial institutions still have more than 6 trillion investable funds. Currently, the credit-deposit ratio (CD ratio) of banks is 79.48 percent.

Signs of improvement in credit flow of commercial banks have been seen in the last 8 months. According to the data of the Nepal Bankers Association, the credit flow of commercial banks has increased by 6.12 percent to 4850 billion rupees from Shrawan to mid-Falgun of the current fiscal year 2081-82. Until mid-Ashar, commercial banks had disbursed loans of 4570 billion rupees.

Meanwhile, deposit collection in the 8 months of the current fiscal year has increased by 4.90 percent to 6037 billion rupees. Until mid-Ashar, commercial banks had collected deposits of 5754 billion rupees. Accordingly, in the last 8 months, deposit collection has increased by Rs 2.82 billion and loan investment by Rs 279 billion.