According to a half-yearly report of Nepal Rastra Bank (NRB) on economic situation of the country released on Friday, trade deficit with other countries surged by 74 percent along with a whopping 47 percent rise in trade deficit with India. [break]
Despite an alarming rise in current account deficit fueled mainly by trade deficit, the balance of payment deficit remained almost at the same level seen for the past three months at Rs 19.8 billion. The inflows of workers´ remittance grew by 12.6 percent to Rs 106.1 billion while pension inflow recorded a huge increase of 120 percent during the period.
As a result of widening trade deficit, the total foreign currency held by the banking system in dollar terms declined by 7.5 percent to $3.32 billion. The decline in reserve was 12.4 percent in convertible currency while the stock of non-convertible currency that represents Indian currency recorded a rise of 40 percent during the period.
The volume of total deposits in the commercial banks recorded a slow growth of 4.7 percent to Rs 575 billion compared to a rise of 11.5 percent in the total loans and advances that they extended during the period.
The higher expansion of loan and advances relative to deposit mobilization of commercial banks increased the credit-deposit ratio to 89.3 percent in mid-January 2010 from 81.2 percent in mid-July 2009, according to the NRB statement.
Reflecting a strong investors´ confidence despite recent incidents that have gloomed business doing environment, the flow of loan to private sector has also increased by 15.6 percent, while loans acquired by government sector declined by 11 percent.
Of the major changes in the sector wise flow of banks´ loan, the volume of loan extended for residential sector recorded a slow growth of 5.4 percent whereas there was a decline of 10 percent in loan flows to non-residential projects, an indication of declining demand for apartments and readymade houses. Similar slow flow of loans was also observed toward automobile sector.
The liquid assets of the commercial banks have declined substantially in the review period. In the first six months of previous year, such assets had grown by 8.8 percent amounting to Rs.164.4 billion as on mid-January 2009, NRB said.
On the interest rate, the weighted average 91-day Treasury Bill rate stood at 8.74 percent in the sixth month of 2009/10 compared to 4.32 percent in the sixth month of the previous year.
Similarly, the weighted average inter-bank rate increased to 12.83 percent in the sixth month of 2009/10 compared to 3.37 percent in the same period last year.
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