By TRN Online, Kathmandu, Mar 29: Credit outflow has been more aggressive than the deposit collection of the commercial banks and institutions in the current fiscal year (FY).

The Nepal Bankers Association’s (NBA) data showed that the credit flow rose by 12 per cent while deposit collection went up by only 4 per cent in the period between mid of July to March end of the current FY.

The credit flow stayed exciting as the economy continued recovering. The data showed that the lending amount rose by Rs. 464 billion from mid-July to mid-March. With this, the credit amount accounted for Rs. 4,170 billion in March-end from Rs. 3,706 billion the mid-July of the current FY.

The aggressive lending pushed the interest rate on loans to rise upwards. The Macro-Economic and Financial Situation report of the first seven months of the Nepal Rastra Bank (NRB) showed that the weighted average lending rate increased to 10.31 per cent in mid-February 2022 from 8.89 per cent in the mid-February 2021.

However, the rise in deposit amount did not match the rise in the lending amount. The deposit increased by Rs. 172 billion during the current FY. With this increase, the deposited amount accounted for Rs. 4,330 billion in March-end from Rs. 4,158 billion accounted in the mid-July of the current FY.

The growth of deposits by Rs. 22 billion in the last month sparked hope that the deposit will go up soon in the future. The cost of the sluggish deposit is being reflected in the flow of liquidity in the banking system in the current FY.

The BFIs have increased the interest rate on deposits to raise the deposit amount. The interest rate rose by 1.63 percentage points year on year (YoY) between mid-February 2022 and mid-February 2021 which is slightly more than a 1.42 percentage point increment in the rate of lending. The weighted average deposit rate increased to 6.49 per cent in mid-February 2022 from 4.86 per cent recorded in mid-February 2021.

In addition, deposits in foreign currency also (FCY) shrank. The deposit in FCY amounted to Rs. 102 billion at the end of March which was Rs. 116 billion at the beginning of mid-July. Simultaneously, the lending in the FCY has also sharply gone down. It amounted to Rs. 47 billion at the end of March which was Rs. 156 billion at the beginning of the current FY.