Half of commercial banks struggle to bring down the CD ratio below mandatory 90% as fiscal year inches closer to end

Published On: June 28, 2022 06:35 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, June 28: The banks and financial institutions (BFIs) collected deposits of Rs 5 billion in the past one month. This, however, hashowever, has failed to give cushion to almost half of the banks to abide by the mandatory credit-deposit ratio (CD Ratio) rule enforced by the regulator.

According to Nepal Rastra Bank (NRB), the deposit collection of the BFIs, as of Sunday, reached Rs 4.987 trillion, up from the amount of Rs 4.982 trillion until last month. The BFIs provided Rs 4.705 trillion in loans.

The deposit collection of commercial banks alone hit Rs 4.401 trillion. They provided loans of Rs 4.178 trillion, down by Rs 1 billion during the review period.

With an increase in deposit collection compared to the loans issuance, some of the banks have been able to maintain their CD ratio within the limit. Currently, the average CD ratio of the BFIs stands at 89.26 percent, down from 89.37 percent a month ago.

Despite an improvement in average statistics, still about a dozen of banks have failed to maintain the CD ratio. According to an NRB official, a few banks’ CD ratio is still around 95 percent.

Through the monetary policy 2021/22, NRB scrapped the credit to core-capital plus deposit (CCD) ratio rule and replaced it with the CD Ratio for the BFIs. In the new rule, the BFIs need to maintain the CD Ratio at a ceiling of 90 percent while issuing loans to their clients.

The central bank has given a deadline of this fiscal year end for the BFIs to maintain the CD ratio within the prescribed limit. As of now, most of the banks were enjoying leeway of the liquidity crisis to breach the mandatory rule of the regulator.


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