Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: In a move expected to bolster liquidity in the banking sector, the Deposit and Credit Guarantee Fund (DCGF) has announced a significant investment of NPR 4.15 billion into the fixed deposits of eligible commercial banks.
The Fund has invited proposals from commercial banks to accept the institutional deposit, requiring banks to submit sealed bids detailing the desired amount and the interest rate offered for the investment. Banks seeking this deposit must submit their applications by the close of business on Mangsir 15 (Mid-December).
Strict Financial Health MandatesThe DCGF has attached rigorous eligibility criteria to this investment, ensuring the funds are placed only with banks demonstrating strong financial health and compliance. This approach suggests a strategic dual-purpose: utilizing the DCGF’s capital and indirectly rewarding financially sound institutions.
Key mandates for applicant banks include:
Market ImplicationsThe injection of NPR 4.15 billion is a targeted measure to ease the liquidity pressure felt by commercial banks. By setting a low threshold for the NPL ratio (below 8%), the DCGF is effectively ring-fencing its investment, making the funds accessible primarily to top-tier commercial banks with robust balance sheets.
The sealed bid process for interest rates will also introduce mild competition among eligible banks to attract the funds, potentially resulting in slightly more competitive deposit rates for this institutional funding. Overall, the move is seen as a strategic intervention by the DCGF to diversify its investment while simultaneously contributing to the stability and liquidity of the healthy segment of the nation’s financial system.
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