By Ajay Chhetri, Kathmandu, Dec. 22: Nepal Rastra Bank (NRB) viewed that the rise in the import and aggressive lending in the wake of the recovery phase of the economy led to tightening of the liquidity in the banks and financial institutions.
At an interaction programme with economic journalists organized by the NRB today, the NRB informed that demand for liquidity shot up in a short period as the economy was currently going through a recovery phase.
The NRB further informed that a rise in the deposit is relatively slower than the demand for credit has further created challenges.
Addressing the programme, NRB governor, Maha Prasad Adhikari, viewed that economy faces different phases of the trade cycle during its development. He said that the mismatch of credit flow and deposit mobilization and import financing hike has created a challenge in the liquidity. He assured that the NRB will take necessary policy measures to manage the current situation within its mandate.
In the programme, the Executive Director of the Research Department of NRB, Prakash Kumar Shrestha, made a presentation on the current situation of the economy. He showed that the rate of credit flow has surpassed the rate of deposit mobilization after mid-April 2021 and the interest on credit and deposit began to rise.
He also showed that the balance of payment (BOP) is in a deficit position in the current fiscal year (FY). He also presented that before the current FY, the external sector had also witnessed deficit BOP in 2017/18 and 2018/19.