Latest statistics unveiled by Nepal Bankers Association shows deposit mobilization of 'A' class commercial banks grew by 15.31 percent to Rs 1.53 trillion and lending by 6.51 percent to Rs 1.15 trillion over the past eight months since April 17 - a week before the devastating earthquake rocked the country.The data includes deposit mobilization and lending figures of 30 commercial banks.
In the corresponding period of 2014, such deposits and loans had increased by 12 percent and 15.6 percent, respectively, to Rs 1.28 trillion and Rs 992 billion.
Bankers say slowdown in economic activities due to the devastating earthquake of April 25 and promulgation of new constitution that escalated the ongoing Tarai turmoil and triggered the unofficial economic blockade has affected the growth of deposit and loan mobilization of commercial banks. They say the recent turmoil has dented the confidence of investors to borrow money from the banks and start their projects while deposits did not grow much due to low economic activities.
"The growth rate of both deposit and loans has slowed due to the recent turmoil," Bhuvan Kumar Dahal, CEO of Sanima Bank, said. "Firms, industries as well as individuals are shying away from borrowing from banks in the aftermath of the devastating earthquake. The situation further aggravated due to the Tarai turmoil and subsequent economic blockade that have brought the country to almost a grinding halt," added Dahal.
While the deposit and lending growth has moved up slowly in commercial banks, which accounts for country's two-thirds of deposit and loan mobilization, the banking industry is still awash with excess liquidity (loan-able fund). Nepal Rastra Bank (NRB) has been mopping up liquidity surplus from the market on a regular basis through various monetary instruments. While Rs 138.35 billion of the total mopped up amount from the BFIs is still in the central bank's vault as of December 23, NRB has decided to absorb another Rs 1 billion this week through reverse repo auction.
However, Sanima Bank's CEO Dahal told Republica that the liquidity surplus was a result of massive deposit growth in the beginning of the current fiscal year amid slowing demand for loans.
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