Impending stress on BFIs

Kathmandu, Dec 22. Looming pressure has been compounding on Bank and Fianancial institutions as deposits outweigh the lending in the first week of Poush due to sudden increase in the former.

Nepal Bankers’ Association reported Rs. 3610 billion deposit in the first week of Poush however managed to lend only Rs. 3021 billion except in foreign currency. In this rare incidence that has taken place this week, deposit is surprisingly greater than lending.

Meanwhile, deposit in foreign currency now is NRs 107 billion where the lending is Rs. 101 billion in aggregate. With this, the total deposit including deposit in foreign currency reached Rs. 3717 and lending touched Rs. 3123 in the end of the first week of Poush.

As the real sector has started to open its operations after long pandemic stricken lock down, vault of the banks has now been furnishing with the deposit of employed public. However, the acceleration in the rate of lending has yet to be taken place.

Though all walk of life is showing pretty resilience in the recent days, business transaction has to bounce back in its optimum level to enable BFIs to spring out the credit facilities in its full potential.

Depositors have added Rs. 23 billion including in foreign currency in first week of Poush but banks only able to extend additional Rs. 22 billion of the same aggregation the week. Its reflects the demand of credits one hand as against the accumulation of deposit in other.

As the depositors flocking in with their deposit, it could put tremendous pressure for Bank and Financial Institutions to unleash more credit. In the same vein, unfolding political fragmentation ups the ante of policy makers including NRB – with careful consultation with BFIs- to compute the risks meticulously and improvise the policies carefully to land the banking sector in safe mode.