Govt extending timeline for banks to use 80 percent of local govts’ reserve funds in their CD ratio count till mid-January 2023

KATHMANDU, Sept 7: The government is extending the timeline allowing banks to consider up to 80 percent of the reserve funds of local governments in their deposit by another six months, citing the deepening liquidity crisis with the banks.

Last December, the government increased the limit for the banks to consider the funds released by the federal government for the local governments in their credit-deposit (CD) ratio from 50 percent to 80 percent. The provision was into effect till mid-July.

According to an official at the Ministry of Finance, the ministry wrote to Nepal Rastra Bank (NRB) to implement the provision till mid-January 2023. At present, the CD ratio with a number of banks has crossed NRB’s threshold of 90 percent due to the low amount of deposit collection.