Thursday, January 6, 2011

Bankers urge premier to release budget soon, bring policy on crusher industry

Bankers have today appraised the care-taker Prime Minister Madhav Kumar Nepal about the problem faced by banking sector including liquidity crunch and their investment on crusher industry.
The commercial banks are currently facing liquidity crunch due to delayed full-fledged budget coupled with diversion of deposits to other financial institutions offering higher interest rates.
According to the central bank, in the first four months of current fiscal year (mid-November) total government spending increased by only 1.8 per cent to Rs 51.54 billion, compared to an increase of 36.5 per cent in the same period of last year, creating tight liquidity situastion in the market.
Nepal Rastra Bank (NRB) data reveals that the deposit, which stood at around Rs 620 billion in mid-July 2010, currently stands at around Rs 623 billion.
The government spending has dropped sqeezing the liquidity in the market due to delayed full-fledged budget by four months than the regular schedule. The government spending creates more liquidity in the market as the money pumped by the government attracts private sector money too.
Due to liquidity crunch the Credit to Deposit (CD) ratio of commercial banks has also gone up from the central bank-fixed ratio of 85 per cent.
Not only the much delayed budget but also the higher interest rates offered by finance companies and cooperatives -- that are offering over 15 per cent interest -- have sqeezed liquidity from the commecial banks.
According to the central bank, the deposit mobilisation of commercial banks has declined by Rs 4.5 billion during the first four months of 2010-11 against a growth of Rs 19 billion in the same period last year. The central bank attributed the decline in deposit mobilisation by commercial banks to the diversion of deposit to other financial institutions on account of relatively higher interest rate offered by them.
The bankers also sought a clear policy regarding the crusher industries with the Prime Minister Nepal. "The commercial banks have floated Rs 6 billion loan to the crusher industry," according to president of Nepal Bankers Association (NBA) ans CEO of NIC Bank Sashin Joshi.
However, the lending to crusher industry stads at Rs 10 billion, including lending from other financial institutions too.

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