Bank C/D ratio goes up to 88pc
KAHMANDU, Feb 07 - Credit-Deposit (C/D) ratio of commercial banks has increased to 88 percent during first five months of the current fiscal year from 81.2 percent during the same period last year as a result of excessive lending against deposits.
During the period, deposits grew by just 4.6 percent to Rs.25.1 billion against credit growth by 11.3 percent to Rs.58.47 billion, according to latest report of Nepal Rastra Bank (NRB) on macro-economic situation of the country. This resulted in liquidity crunch in the banking system.
The liquid assets of commercial banks declined substantially by 11.1 percent to Rs.167.12 billion against the growth of 2.6 percent during the same period last year. Liquid fund too declined by 17.5 percent in the review period.
"A decline in commercial banks balance held abroad and balances with the NRB led to such a reduction in liquid fund of commercial banks," said the central bank. Balance of payment (BoP) deficit continued during five months too due to rising trade deficit and slow remittance growth.
The BoP deficit remained at Rs. 19.60 billion against the surplus of Rs.22.77 billion during the same period last year. The deficit had remained at Rs. 20.49 billion during the first four months of the fiscal year. The current account also registered a deficit of Rs.19.64 billion in months this year against a surplus of Rs. 10.74 billion in the corresponding period last year.
The country witnessed trade deficit by 52.8 percent. The remittance though went up by 10.4 percent in five months from 6.6 percent in four months, remained still far less than 65.8 percent growth recorded during five months last year.
These factors also affected the gross foreign exchange reserves that witnessed a decline of 12.2 percent to Rs. 245.94 billion. Such reserves had gone up by 10.8 percent in the corresponding period last year. During the period, total export declined by 18.7 percent compared to a growth of 28.3 percent in the corresponding period last year. On the other hand, imports grew by 32.8 percent against the growth of 34.9 percent during the same period last year.
In order to address rising imports against declining exports that caused huge trade and BoP deficit, the NRB imposed strict restriction on gold imports which topped surprisingly all goods being imported.
In five months, inflation also climbed double digit at 11.3 percent in five months from 9.9 percent in four months although the price rise was 14.1 percent during five months last year. The price of food and beverage went up by 17.8 percent in five months even higher than 17.2 percent increase of same period last year.
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