By Laxman Kafle
Kathmandu, Oct. 17: Nepal Rastra Bank (NRB) released about Rs. 52 billion to the banks and financial institutions ahead of Dashain festival that concluded recently.
“The currency notes of Rs. 500 and Rs. 1,000 worth Rs. 52 billion were issued to the BFIs for payment to their clients in the festival. The money was released in response to the demands of the BFIs,” NRB spokesman Laxmi Prapanna Niroula said.
He said that not all the money circulated at Dashain would return to the banking channel as people tend to keep some money with themselves for household expenses.
Similarly, NRB issued new currency notes of Rs. 5, Rs. 10, Rs. 20, Rs. 50 and Rs. 100 worth Rs. 9.5 billion for exchange to general public.
Anil Kumar Upadhyay, chief executive officer of Agricultural Development Bank, said that liquidity in the banking sector was declining as a large amount of money was withdrawn by the people to celebrate the festival.
“The increase in the inflow of remittance and the increased income of employees and workers are attributed to high withdrawal of cash this Dashain. Consumption has also increased following the growth of population,” he said.
The inter-bank interest rate has reached around 5 per cent at present while it was 1-2 per cent before Dashain, which shows that liquidity in banking sector is tightened,” Upadhyay told The Rising Nepal.
He said that the banking sector had only Rs. 14 billion loanable fund at present, only about 25 per cent of the normal deposit level.
Considering the problem of the loanable fund in the banking sector, the NRB has started to inject money through the repo.
Anil Keshary Shah, chief executive officer of Nabil Bank, said that the money would begin to return to the banks after Tihar festival.
The demand for money is high in the festival and huge amount of money is withdrawn from BFIs, he said.
"Definitely, people spend more money in the festival for consumption, to purchase vehicles and other luxurious items, which leads to high demand for money," he said.
The economy of the country will be vibrant during the festival with increased expenditure of money, he said, adding that this tends to be high in the developing economies like Nepal.
He said that there was no need to worry about increasing expenditure by the consumers.
Shah said that people’s tendency to return the cash to the banking sector was, of late, growing.
"In my 30 years' banking experience, with growing number of bank accounts of people in rural areas, more money is returning to the banks. I think around 90 per cent of money will come back to the banks this year," he said.
He said there would be no problem of loanable funds this year as in the past years.
"The demand for loans has not increased this year compared to last year. The liquidity will be overcome after some time as the money will start to come to the BFIs," he said.
Former executive director of Nepal Rastra Bank (NRB) Trilochan Pangeni said that people started to spend more money in the Dashain festival for consumption which had to be checked.
Stating that growing consumption was contributing to the increase in imports and huge amount of money spent for that, he said that an enormous amount would be saved if people were discouraged to spend extravagantly on unnecessary items, he said.
“People withdraw a large amount from banks and financial institutions to celebrate festivals which hit the liquidity after Dashain festival. The government should increase interest rate in deposit during the festival period to discourage unnecessary spending. This will motivate people to save their money,” he said.
Tripitak recitation to enhance glory of Lumbini, says...15 Nov, 2019
Life Saving Airlifts15 Nov, 2019
Diplomacy At The Highest Level15 Nov, 2019
Green Future Of The Global Trade15 Nov, 2019
Curb River Pollution15 Nov, 2019
Diplomatic offensive a must to solve Kalapani issue15 Nov, 2019
Expressway project hits snag over leak15 Nov, 2019
China suggests talks to solve border issues15 Nov, 2019
Middlemen having a field day at transport offices15 Nov, 2019
Rautahat blast victim seeks life security15 Nov, 2019