Despite remittance improve liquidity tightening continues

By Ajay Chhetri, Kathmandu, Dec 22: Bank and financial institutions have faced a tightening liquidity situation despite good remittance inflow vis-à-vis the fall in the trade deficit of the current account.

Mid-November Current Macroeconomic and Financial Situation data of the Nepal Rastra Bank (NRB) showed that remittance increased by 20.4 per cent and the current trade deficit fell by 15.9 per cent in the first four months of the current year FY. However, liquidity has not been notably improved yet in the banks and financial institutions.

The Nepal Rastra Bank’s (NRB) spokesperson Narayan Prasad Pokhrel informed that the excess liquidity recorded Rs 6 billion on December 21. The excess liquidity at the end of the last FY fluctuated from around Rs 10 to Rs 15 billion.

He said that said there are multiple reasons for tightening liquidity. Meanwhile, he added that credit has slightly risen in the current FY. The data showed that the rise in credit outflow slightly outweighed the deposits in the banks and financial institutions in the current FY thus far.

The data showed credit outflow rose by Rs 58.8 billion in the period in the first four months of the current FY while the deposit rose by Rs 26.47 billion in the same period. Meanwhile, at the end of the first four months of the current FY, the balance of payment remained surplus of Rs 20.03 billion as remittance significantly improved and the trade deficit declined.

In the first four months of the current FY, remittance is recorded of Rs 378.04 billion which is increased from Rs 314.01 billion recorded in the same period of the previous FY. Besides, the trade deficit decreased to Rs 477.9 billion in the first four months of the current FY from which was recorded Rs 568.1 billion recorded in the same period of the previous FY.