Cenral bank opens 'special' refinancing window to ease liquidity crisis

Central bank today opened a 'special' refinancing window for banks and financial institutions to avert systemic risk from tight liquidity situation.
"We have opened 'special' refinancing facility to banks and financial institutions under lender of the last resort to avert systemic risk," said central bank spokesperson Bhaskar Mani Gyawali.
Though the central bank has been providing refinancing facility since April to boost investment on productive sectors, "today's move has increased amount they can get and is tragetted at easing liquidity crunch," he said.
"A financial institution can get refinancing facility up to 60 per cent of capital fund at seven per cent interest rate for four months against good loans," he added. "But they must have been maintaining good governance as the central bank takes note of longer or shorter term problem apart from going through its books to check either it's a managerial or liquidity problem."
The financial institutions should also not exceed their non-performing loans more than five per cent to get the 'special' refinancing facility.
Nepal Bankers Association president Ashoke Rana hailed the central bank's move. "It is the most required move in this liquidity stressed situation," he said, adding that the move will also boost confidence of depositors as the depositors have recently been confused due to various financial institutions 'failure'.
Due to low depositors' confidence, deposit mobilisation of commercial banks could not grow at the rate it used to grow in the past years.
According to central bank data, the commercial banks have Rs 647 billion deposit by the end of May. By the end of last fiscal year, they had Rs 617 billion worth deposit. "The deposit growth rate slowed down in the past couple of months due to low confidence of depositors," Rana added. "The current tight liquidity situation came also due to liquidity mismatch in the financial institutions."

Vibor gets Rs 500 million
KATHMANDU: The central bank today provided Rs 500 million 'special' refinancing under lender of the last resort facility to Vibor Development Bank. "The central bank has provided 'special refinancing facility of Rs 500 million against good loans for a maximum of six months at seven per cent interest rate," according to the central bank that has also asked the Class B financial institution to submit liquidity management plan within 15 days. The board of directors of Vibor has also agreed to go to merger with another financial institution within three months.