Financial Sector Feels Prohibitory Order As Deposit, Credit Flow Slumps

Deposit and credit flow of the bank and financial institution (BFIs) slumped in the period between mid-April to mid-May, according to the statistics revealed by the Nepal Rastra Bank.

The deposit of the BFIs rose only by Rs. 8 billion while the credit flow rose by Rs. 43 billion in the given period. Rise of deposit in BFIs in the preceding period from mid-March to mid-April was Rs. 120 billion while the rise in credit flow in this period was Rs. 167 billion.

Total deposit in BFIs stood at Rs. 4,473 billion in mid-May while it was Rs. 4,465 in the mid-April. In parallel, credit flow of mid-May stood at Rs 4,068 billion while it was Rs. 4,025 billion in mid-April.   

However, the statistics recorded improvements in several crucial ratios despite decline in the volume of flow of money. Total credit to deposit ratio at the end of mid-May stood at 90.95 per cent while it was 90.16 percent in the mid-April. Similarly, ratio of the fixed deposit to total deposit rose up to 49.04 per cent while it was 48 per cent in the previous same period.

The inflow and outflow of money in the banking and financial sector has slowed down since the prohibitory period. The outcome started to reflect in changing rates of interest. In mid-May the weighted average interest rate on lending declined to 8.53 per cent from 8.61 per cent a month earlier. At the same time, interest on deposit had risen to 4.81 from 4.79 a month earlier.

Similarly, activities of the banking and financial institutions remained standstill during this period. The opening of the new deposit accounts and new lending account has stuck on Rs. 36 million and Rs. 1.6 million respectively in the period from mid-April to mid-May.