As the financial system is drained out of cash, the central bank today injected an additional Rs 20 billion in the system to ease a growing loanable fund crunch.
The central bank issued a repo worth Rs 20 billion amount through the bidding process for the next two weeks. Last week too, the central bank had injected Rs 30 billion through the monetary instrument.
The banking system is currently under pressure to manage loanable fund. The banks attribute the crunch of loanable fund crunch to the central bank's new rule of credit-deposit (CD) ratio implemented through monetary policy. Through the monetary policy, Nepal Rastra Bank (NRB) has implemented the CD ration with a ceiling from 90 per cent from earlier limit of 85 per cent, but scraped the provision of credit to core-capital plus deposit (CCD) ratio, which had given a room to the financial institutions to lend.
Bankers, however, are of the view that the change in policy has tightened the liquidity from the financial system, through the central bank disagree.
According to bankers, banks now have only Rs 25 billion in loanable funds. The banks have also started increasing interest rates to attract the deposit. The loanable fund crunch has also increased interbank transactions pushing the interbank rate to over 5 per cent from below one per cent in the past few months.
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