January 19: In the first five months of the current FY, the interbank transaction of banks and financial institutions (BFIs) other than commercial banks has increased by four times. In the review period of the last FY, these BFIs carried out Rs 30.78 billion worth of interbank transactions whereas in the same period of the current FY, such amount is Rs 171.88 billion. It indicates of greater liquidity crisis in these BFIs than in commercial banks.

Meanwhile, the interbank transaction of commercial banks has increased by 1.5 times. The interbank transaction which was Rs 317 billion during the first five months of the last FY has increased to Rs 486 billion in the review period of the current FY, according to the current Macroeconomic and Financial Situation of Nepal based on five months' data published by NRB.

From the initial period of the current FY, the interbank transactions between BFIs were in increasing trend. The government's failure to carry out capital expenditure as per its target has lead to the liquidity crisis, said the bankers. With the shortage of investable money, the banks are collecting funds by increasing interest rate of deposits.

With the increase in deposit interest rate, loan interest rate has also increased resulting deterioration of investment environment, as per the entrepreneurs.  The investors who invest by taking loans from BFIs are not willing to take risk on increasing loan interest rate.

Along with the interbank transaction, weighted average interest rate of interbank transaction has also increased. According to NRB, the weighted average interest rate of interbank transaction was 2.67 per cent by the mid-December 2016. During the same period of the last FY, such interest rate was 0.82 per cent while it was 3.59 per cent by the mid-November of the current FY.