Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: As the result of acute liquidity crisis in the financial system, banks have started facing short of money to maintain the Cash Reserve Ratio (CRR) as mandated by the Nepal Ratra Bank (NRB).
Half a dozen of banks are seen facing difficulty in maintaining the CRR, a certain amount of deposits as reserve kept in the central bank by the commercial banks. As per NRB, banks are required to maintain the CRR of 3 percent of total deposits.
Meanwhile, the central bank is providing loans to the banks struggling with at 5 percent interest. “We are relying on NRB to even maintain CRR beside providing loan to customers while Standing Liquidity Facility (SLF) is being used to meet other requirements,” said a banker.
Banks and financial institutions have used SLF of Rs 21.94 billion on Sunday to alleviate the shortage. Similarly, banks have raised interest rates on deposits due to the liquidity problem. However, this move, too, has not led to much improvement in new deposits. Instead, the liquidity crisis has increased by the expansion of loan for imports.
“Interest rates are likely to rise further in November. If effective measure is not adopted on time to address this crisis, banks will continue to compete to raise interest rates to protect existing deposits,” said Suman Sharma, Chief Executive Officer of Sunrise Bank
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