May 18: The interbank loan taken by banks and financial institutions has increase by 42 percent in the nine months of current fiscal year. Although the current FY has been considered as ‘high liquidity year’, tight liquidity in the third quarter has attributed to increase in interbank loans.

Commercial banks had carried out interbank transactions of Rs 329 billion during the nine months of previous FY which has increased to Rs 640 billion in the same period of current FY. Similarly, development banks and finance companies had carried out such transactions worth Rs 163 billion in the same period of last FY which has decreased to Rs 61.47 billion in the review period. In the last mid-April, weighted average interest rate on interbank loan was three percent after which it has increased to 5.66 percent. Presently, it is below one percent that indicates of improve in tight liquidity in the banking sector.

After the devastating earthquake and the border blockade, Nepal Rastra Bank had mopped up Rs 471 billion excess liquidity from banking sector due to low investment. Following the end of border blockade, trade expansion and liquidity holding through short-term monetary tools led to increase in interbank transactions of BFIs. The BFIs’ loan investment has increased by 15 percent to Rs 1565 billion in last mid-April. Likewise, bank loan investment has increased by 14.4 percent in the private sector.

Meanwhile, utilization of refinance facility provided by NRB in subsidised rate to expand export and productive sector has decreased during the review period. The total sum of general refinance and export refinance has limited to Rs 2.26 billion and Rs 1.12 billion respectively. Similarly, only Rs 14 million of subsidised loans provided for earthquake survivors has been utilised. Although 20 percent investment in productive sector has been made mandatory by NRB, only 16.32 percent has been invested so far.  In the meantime, deposit collection of the bank has increased by 12 percent to Rs 1970 billion.