Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: The average credit-deposit (CD) ratio of 20 commercial banks in Nepal has decreased to 77.98% as the sluggish economy continues to hamper credit demand. Despite having the capacity to extend loans worth approximately NPR 710 billion, banks are struggling to find borrowers, leaving the system oversaturated with liquidity.
In recent months, most banks have reduced interest rates on their products to between 9% and 7.36%. Even with a premium of 1% added to the base rate, credit uptake remains stagnant.
Improved Liquidity Position
Compared to deposit growth, the inability to disburse loans has placed all 20 commercial banks in a comfortable liquidity position concerning their CD ratios. The Nepal Rastra Bank (NRB) mandates that the CD ratio must remain below 90%. Any breach results in penalties.
According to the latest NRB data, Rastriya Banijya Bank has the lowest CD ratio at 64.12%, making it the most liquid bank. Nepal SBI Bank follows with a CD ratio of 73.51%, while Himalayan Bank stands at 73.87%.
Banks with Lower CD Ratios
– Agricultural Development Bank: 74.02% – Nepal Bank Limited: 75.31% – Prabhu Bank: 76.01% – Standard Chartered Bank: 76.48% – Global IME Bank: 76.82% – Laxmi Sunrise Bank: 77.05% – Nepal Investment Mega Bank: 79.46% – NIC Asia Bank: 79.62%
Banks Exceeding 80% CD Ratio
– Sanima Bank: 80.13% – Nabil Bank: 81.71% – Everest Bank: 81.37% – Siddhartha Bank: 81.53% – NMB Bank: 81.70% – Machhapuchchhre Bank: 82.17% – Kumari Bank: 82.88% – Citizens International Bank: 83.65%
Prime Commercial Bank Tops the List
Prime Commercial Bank has the highest CD ratio at 85.38%, approaching the regulatory limit of 90%.
Stagnant Credit Demand and Policy Challenges
The current economic environment, marked by low credit demand, underscores the challenges faced by the banking sector. While reduced interest rates aim to stimulate borrowing, the overall economic stagnation and reduced investment activity have hindered credit disbursement.
Experts suggest that boosting economic activities and fostering confidence among borrowers are essential to improving credit uptake and addressing the current liquidity surplus.
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