November 12: Nepal Rastra Bank (NRB) has drawn the attention of Banks and Financial Institutions (BFIs) to not reduce the interest rates on deposits, citing the high liquidity in the market. The central bank has informed the chief executive officers of the commercial banks not to reduce the interest rate on deposits as the high liquidity in the market hasn’t been managed yet.

There is a liquidity of more that Rs 200 billion in the market due to the lack of credit flow. Dev Kumar Dhakal, the executive director of the regulatory department of the central bank, said that the BFIs themselves need to be involved in the management plan of such high liquidity situation.

According to him, BFIs have been encouraged to take initiative to keep the interest rate within a certain limit.

 "The interest rate on deposits should not decline a lot when the liquidity isn’t managed. A sharp fall in interest rates on deposits could have a negative impact on future savings operations. People may feel discouraged to save. Therefore, the banks need to make a good plan for this,” he said. He added that the bankers have also expressed their commitment to do as per the instructions of the central bank.

Nepal Rastra Bank had expressed its concern with the chief executive officers of commercial banks over the ineffective credit flow of concessional loans. The central bank believes that the BFIs have not worked hard enough to disburse the loans despite having the capacity to disburse Rs 160 billion in concessional loans.

According to Nepal Rastra Bank, the banks have not been involved much in the discussions regarding the refinancing facility too. Executive Director Dhakal said that the participation of the banks was low even though the central bank had committed to provide about Rs 200 billion for the refinancing of industries, businesses, professions and other sectors affected by COVID-19 in order to regularize business, pay the wages of the workers or help them to survive.

Executive Director Dev Kumar Dhakal informed that the first phase of refinancing has reached the final stage. He added that the refinancing facility has been extended to all the customers to keep them in a comfortable condition.

Earlier, in a program organized by Nepal Rastra Bank, industrialists had complained that BFIs had neglected to provide the concession policy issued by Nepal Rastra Bank for the COVID-19 affected businesses. Entrepreneurs had also complained about the facility of refinancing and concessional loan not being easily available as well as about the lack of discounts on the interest rates to the governor.

The bankers have expressed that they have already applied for the refinancing facility and that they are committed to implement the facility as soon as possible.

Maha Prasad Adhikari, the governor of Nepal Rastra Bank, has had several rounds of discussions with the people affiliated with the banks. He has also held discussions with the chief executive officers and chairpersons of financial institutions.