Banking sector in panic as liquidity crisis deepens in the financial system

KATHMANDU: Bank and Financial Institutions (BFIs) have been experiencing liquidity crisis in the banking system in recent months in comparison to the previous fiscal year (FY).

According to Nepal Rastra Bank (NRB), excess liquidity on January 16, 2021, recorded Rs. 157 billion. In contrast, the excess liquidity recorded on October 28, 2021, is Rs. 17.27 billion.

In this connection, Executive Director of Nepal Bankers’ Association Anil Sharma said that the declining level of liquidity in the context of an upsurge in demand for borrowing is creating pressure for banks and financial institutions. He observed that a steep surge in borrowing amid rising imports, declining remittance, a low level of government expenditure in the first quarter, and people’s extra expenses in the ongoing festival seasons have created a crunch in liquidity.

He said that a rise in remittance in the future, an increase in government expenditure, and some policy support from NRB could be expected in the coming days to lead to sufficient liquidity back again.

Deputy Spokesperson of NRB, Narayan Prasad Pokharel, said that there will not be a crisis of liquidity in the near future. He pointed out the minimum liquidity of the BFIs and said there was liquidity for them as required for the present. He added that NRB has been looking at the development.

Fiscal Nepal |
Friday October 29, 2021, 11:08:59 AM |

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