Commercial banks deposits increases

Propelled by the pre-year end government spending, the deposit of the commercial banks have seen a 'satisfactory' increment compared with a couple of months ago.
"Only two weeks ago, around Rs 7 billion deposit has increased," said Sashin Joshi, president of Nepal Bankers Association (NBA).
According to the highly placed source at the central bank the deposit of commercial banks has increased to Rs 592 billion by the end of May. "It might increase to Rs 600 billion by the end of the fiscal year," the source added.
However, Joshi thinks that the growth rate is still lower compared with last fiscal year's growth rate. "However, it is a good sign as in the last six months, there was almost zero per cent increase in the deposit growth," he said adding that the bankers are watching keenly the sustainability of the growth rate.
Accelerated by the increasing growth rate of the deposit, the deposit mobilisation of the commercial banks has also increased.
According to the central bank's data based on 10 months macroeconomic situation, deposits mobilisation of commercial banks increased by 5.6 per cent (Rs 30.6 billion) amounting to Rs 580.5 billion as at mid-May 2010. In the nine months, deposits mobilisation of commercial banks stood at Rs 576.3 billion.
Similarly, the liquid assests of the commercial banks also stood at Rs 170.4 billion as at mid-May. It was at Rs 164.9 billion in the six months. Liquid assets include the cash at the bank's vault, their reserves at the central bank and the marketable securities.
"The positive data will certainly boost the confidence of the depositors, who are still under the hangover of the last Dashain's bitter experience," the central bank source said adding that they are hesitant on depositing money at the banks due to low confidence, though banks are offering depositors higher interest rates than last year.
The depositors have lost confidence due to series of issues starting from last Dashain's cash crunch to souce declaration while depositing above Rs 1 million.
Meanwhile, the commercial banks average credit-to-deposit (CD) ratio has also dropped to 86 per cent from around 95 per cent some months ago. According to the central bank commercial banks CD ratios should not exceed 95 per cent by the end of this fiscal year, 85 per cent by the end of 2010-11, and 80 per cent by the end of 2011-12.
Similarly, to make the banking sector more stronger, the NRB has also drafted risk management guidelines that will be issued to commercial banks by July end. "Though, new prudential measures will be challenging for the commercial banks to meet, it will strenghten the sector and help mitigate the market risks," the central bank source said.