Most of the banks and few development banks subscribed to the NRB-held 364-day treasury bills at weighted average rate of around 3.58 percent. These securities will mature in 299 days, according to NRB Spokesperson Bhaskar Mani Gyawali. [break]
“We decided to issue the securities mainly as excess liquidity in the banking system has soared to Rs 50 billion,” Gyawali told Republica, adding that the step has provided relief to some extents to the system.
Banks have been witnessing substantial rise in deposits in recent months mainly due to positive breakthrough in the peace process and switch of depositors from category B and C institutions to the commercial banks. Contrary to the deposit growth, banks, however, have been failing to find significant projects and borrowers in the market.
Some of the bankers have been deliberately not issuing loans because they need to maintain credit-deposit ratio at 80 percent by mid-January 2012, while others lament they have not been able to spur credit demand.
NRB officials, meanwhile, argued that the credit demand has shrunk mainly because the bankers have kept the lending rates too high to match with the market sentiment. “If the demand for credit has slowed, it is the duty of the bankers to reverse the situation. Sadly, they have done nothing like cutting rates even though we repeatedly suggested them to do so,” said a source.
NRB has been informally pushing the banks to invest on productive sectors and also maintain the deposit growth rate; meaning banks should cut lending rates without touching deposit rates. However, bankers have so far cold-shouldered the call.
Bankers nonetheless have indicated that the rates could go down after mid-January 2012, when the first half of the current fiscal year ends, as they will have no option but to expand lending if they want to maintain their growth and profit.
Related story
NRB to issue repo worth Rs 20 billion
