‘NRB Has Left No Stone Unturned To Provide Liquidity To BFIs’

Oct 10, 2021 02:23 PM Merolagani

The liquidity crunch felt by the banking sector in recent weeks is gradually depleting after their deposit collection increased significantly compared to loan extensions.

According to Nepal Rastra Bank, the banking sector has liquidity of Rs 17 billion excluding CRR by the last Friday.

“The central bank has left no stone unturned to provide liquidity to the banking sector. The sector has liquidity of Rs 17 billion except CRR which means there is no liquidity crunch in the financial market,” said Narayan Pokharel, sub-spokesperson of NRB.

The liquidity crunch felt by the banking sector since the last month was expected to ease after this month.  However, it is eased due to an increase in remittance amid the Dashain festival and due to increase in government expenditure.

The central bank clarified that the financial system is not going through a liquidity crunch as rumored. NRB alleges that the banks only complain about crunch but do not maintain required liquidity. The banks are required to maintain short-term, medium-term and long-term liquidity as per a given NRB standard. However, they have failed to do so. Above all, they are extending more loans while accepting Repo to maintain CRR. Thus, the cry of liquidity crunch is their own doing, said Pokharel.

As per Pokharel, RB had requested BFIs to balance deposit collection and loan extensions. However, ignoring such concern, BFIs are extending exuberant loans carelessly which have hugely decreased their investable fund.

Moreover, the liquidity crunch felt by the banking sector is also fueled by the huge increase in demand of loans following the ease in COVID-19 restriction.

Furthermore, NRB directive that scrapped CCD ratio and implementation of CD ratio is viewed to further declined the investable fund of banks. Thus, the bankers and businesspersons have demanded to scrap the CD ratio.

 

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