KATMANDU, September 17: The Nepal Rastra Bank (NRB) on Thursday injected an additional 20 billion rupees into the national financial system in an attempt to alleviate the growing lack of liquidity in the banking system.
According to NRB, he issued a pension worth the donated amount through the bidding process for the next two weeks. Also last week, the central bank injected Rs 30 billion via the monetary measure.
The country’s financial market is currently under pressure to manage liquidity, which has largely been blamed on the NRB implementing the credit-to-deposit (CD) ratio rule. Through monetary policy, the NRB replaced the base capital plus deposit (CCD) credit grant ratio with a maximum limit of 85% per CD ratio with a 90% cap.
According to bankers, banks now have around Rs 25 billion in loanable funds due to the slowness of deposit collection compared to a sharply rising lending rate. Banks have opted for increased interbank transactions to manage the necessary funds. As a result, the interbank rate has fallen from less than 1% to 5% in recent months.
Due to the pressure of declining liquidity in the banking system, banks and financial institutions have also started to increase their interest rates on deposits and loans. Many banks have already offered double-digit interest rates to attract funds into term deposits.