KATHMANDU, Nov 1: The credit-to-deposit (CD) ratio of commercial banks has dropped to as low as 60.72 percent due to excessive deposit collection amid low demand for loans.
The records with Nepal Rastra Bank (NRB) show that Rastriya Banijya Bank has its CD ratio at 60.72 percent. Of the 20 commercial banks, seven have their CD ratio of less than 70 percent.
As of the first three months of the current fiscal year, the average CD ratio of banks stands at 74.34 percent. This shows that the proportion of lending is way less than the regulatory ceiling of 90 percent prescribed by the central bank. Only five banks including Prime Commercial Bank, NMB Bank, Citizens Bank International Ltd, Siddhartha Bank Ltd and Sanima Bank have their CD ratio of more than 80 percent.
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The CD ratio of 74.34 percent means banks have been mobilising only this portion of their deposit as loans, which indicates the poorly performing business of the banks. According to the NRB, the banks were able to increase their deposit collection to Rs 6.751 trillion from Rs 6.530 trillion during mid-July and mid-October, which indicates a 3.38 percent increase in their liabilities.
On the other hand, the growth rate of the banks’ lending was less than half compared to their deposit collection. In the review period, the loans issued by banks increased to Rs 5.047 trillion from Rs 4.974 trillion, which means that the growth in the segment stood at just 1.47 percent.
Bankers said the Gen Z movement and its consequences have adversely affected the banks’ functions amid struggle to expand their businesses due to economic slowdown for almost over a year. “The demand for loans has fallen dramatically in the aftermath of the movement amid the banks’ struggle to recover their interest and monthly installments from their clients,” said a banker on condition of anonymity.
In the review period, three out of 20 commercial banks witnessed a decline in their loans issuance. These were Agriculture Development Bank, NIC Asia Bank and Standard Chartered Bank Nepal. The remaining 17 banks had their loan portfolios increased nominally.
According to the latest statistics of the NRB, the weighted average interest rate on loans has fallen to 7.76 percent and the average interest rate on deposits to 4.02 percent. The weighted average of interbank interest rate has come down to 2.75 percent.
