NRB governor reports strong financial indicators: deposits surge, interest rates drop, and economic growth expected to be 4-5%

Published On: December 8, 2023 09:15 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Dec 8: Nepal Rastra Bank (NRB) Governor Maha Prasad Adhikari has reported a 14.9 percent increase in deposits for banks and financial institutions in the current fiscal year.

During a meeting of the finance committee under the House of Representatives on Wednesday, the governor noted that the broad money supply had risen by 5.3 percent in Asoj (mid-September to mid-October) 2022 and increased further by 14 percent in Asoj 2023, directed towards the banking and financial sector. He highlighted that deposits saw an 8.2 percent increase last year, with a notable surge of 14.9 percent this year.

Governor Adhikari pointed out that loans from the banks and financial institutions to the private sector grew by Rs 109 billion compared to the same three months of the previous fiscal year. He expressed optimism that credit disbursement would continue to rise due to improved liquidity and reduced interest rates. The governor attributed the declining interest rates to the flexibility of the monetary policy, stating that last year's weighted interest rate of Treasury bills was 10.14 percent, dropping to 4.94 percent in Asoj 2023, and further decreasing to 2.62 percent for the weighted average interest rate of 91-day treasury bills.

Governor Adhikari highlighted the decrease in short-term interest rates compared to the previous year, mentioning that the inter-bank interest rate had reduced from 2.26 percent in Asoj to approximately 1 percent. He reported a decrease in the base rate of banks from 9.94 percent to single digits and a reduction in the loan interest rate from 13 percent in Magh (mid-January to mid-February) 2023 to 12.1 percent. The governor attributed the declining loan interest rates to the reduction in the interest rate of bank deposits.

Governor Adhikari provided an economic outlook, anticipating a 4 to 5 percent growth in the current fiscal year. He attributed this expected growth to increased tourist arrivals, rising remittances, decreasing interest rates, and a boost in credit disbursements. He also expressed optimism about improved consumer price inflation. Regarding the economic situation, he stated that the price increase for Asoj 2022/23 was 7.5 percent. Adhikari noted strengthening in the external sector, citing a 1.7 percent increase in imports till the end of Asoj 2023 and a subsequent 3.8 percent rise in Kartik (mid-October to mid-November), with a 3.3 percent decrease in the trade deficit.

He revealed a current account deficit of 59 billion rupees, emphasizing a 30 percent increase in remittance inflow till Asoj 2023. Tourist arrivals also surged by 71 percent compared to the first 10 months of 2022. Notably, he mentioned a 21 percent decrease in the number of individuals going for foreign employment in the first three months of the current fiscal year.

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