Current liquidity short term phenomenon: Governor

The current liquidity surplus is a short term phenomenon, according to the central bank governor Dr Yubraj Khatiwada.
"The current liquidity is a short term phenomenon whereas there is a long term credit demand," he said, addressing the official inauguration of the youngest commercial bank, Sanima Bank, here in the Valley today.
Currently the banks and financial institutions have added around Rs 85 billion deposits, and are in the comfortable position against last year's tight liquidity situation, though the loanable liquidity is very limited.
The financial sector should move ahead with other sectors, he said, adding that the sector alone cannot sustain the economy in absence of other sectors that are performing poorly currently. "It’s time the banks and financial institutions think of long-term investment instead of short-term investment and profit maximisation."
The financial institutions should increase their capital base to invest in the long-term. Suggesting the banks and financial institutions to invest in productive sectors like agriculture, Khatiwada said that the banks and financial institutions are competing on profit maximisation in the short term, which will not support the economic growth. "Development of real sector is key in the overall economic development that will ultimately benefit the banks and financial institutions too. There may be less profit but small farmers are also bankable and the banks should look to the villages, where there is immense opportunity."
The long term investment in the productive sector, despite less benefit, is sustainable, he suggested.Sanima Bank — the 32nd bank — will also help mobilise domestic and foreign investment in the productive sectors, he said, hoping that Nepal Investment Year 2012-13 will benefit from the bank that is promoted by the Non-Resident Nepalis Association (NRNA) that would help invite foreign investment in the country. "The bank could help make Nepal Investment Year successful."
Indicating that Sanima Bank will be the last commercial bank for the time being, central bank governor also said that the paid up capital is not the measuring rod of a commercial bank. "There are other indicators like good governance."
The bank's chairman and president of the NRNA Jeeba Lamichhane promised to maintain good governance in the institution. "We have maintained good governance in our bank and will maintain it," he said, adding that the bank is providing scholarships to some 16 students of 10+2 level apart from training to 40 youth of its eight branches in the rural areas. "The bank has allocated Rs 5.3 million for such programmes," he added.

'Do not expect dividend soon'
KATHMANDU: Central bank governor Dr Yubraj Khatiwada requested the investors not to expect dividend immediately. "The banks and financial institutions should have patient and increase their capital base instead of immediate profit and dividends," he said, suggesting them to maintain capital adequacy more than the central bank's prescription to cushion the future risks. "The country is passing through the transition and the banks and financial institutions and investors should change their tendency of immediate dividend rather think of long-term strong capital base," he warned.