KATHMANDU, September 17: Nepal Rastra Bank (NRB) on Thursday injected an additional Rs 20 billion in the domestic financial system in an attempt to ease a growing shortfall of liquidity in the banking system.
According to NRB, it issued a repo worth the given amount through the bidding process for the next two weeks. Last week too, the central bank injected Rs 30 billion through the monetary measure.
The country’s financial market is currently under pressure to manage liquidity, which has been blamed largely on the NRB implementing the rule of credit-deposit (CD) ratio. Through the monetary policy, NRB has replaced the provision of credit to core-capital plus deposit (CCD) ratio with a maximum limit of 85 percent by CD ratio with a ceiling at 90 percent.
According to bankers, banks now have around Rs 25 billion in loanable funds due to the slow rate of deposit collection compared to a surging lending rate. The banks have been opting for increasing interbank transactions to manage necessary funds. As a result, the interbank rate has crossed five percent from below one percent in the past few months.
Due to the pressure of falling liquidity in the banking system, banks and financial institutions have also started to raise their interest rate on both deposits and loans. Many banks have already been offering interest rates in double digits to attract funds in fixed deposits.