Kathmandu,
Feb. 1: The central bank, Nepal Rastra Bank, has denied that there was
liquidity shortage in the market as claimed by the banks and financial
institutions.
Speaking
at an interaction on 'prevailing situation in the banking sector and ways
forward' organised by Nepal Bankers' Association (NBA) on Wednesday, deputy
governor of NRB Chintamani Siwakoti said that there was sufficient liquidity in
the market, but banks needed to put their efforts to get it into their system.
He
urged the banks to raise the interest rate on savings.
"In
every situation, be that the earthquake and blockade, banks are reaping profits
while the depositors never benefited from the banks profits. I don't understand
why the banks are hesitating to increase the interest rate on savings,"
said Siwakoti.
According
to him, banks should offer about 5 per cent interest on savings and charge 9 to
10 per cent on loan mobilizations.
"Without
attracting deposits you cannot manage liquidity but the deposits won't come to
the banks without attractive interest rates. If you offer better interest rate
on savings, you can attract more deposits," he said.
He
stated that the problems were largely due to the banks' failure to manage
assets and liability.
In
the last five years, the average growth of deposit and credit was 20 and 19 per
cent respectively but in November/December last year the credit was up by 30.4
per cent.
"Reduce
loans to unproductive sectors such as real estate and auto and mobilize more
credit to the small and medium industries and agriculture," he directed
the banks.
Siwakoti
said that more money will come into the banking system as the government is
releasing about Rs. 74 billion for the second installment of the housing
reconstruction grant while the NRB has a room to float treasury bills worth Rs.
47 billion.
Vice-president
of NBA Kishor Maharjan said that the banks were having trouble in mobilizing
loans and issuing letter of credit (LC) due to credit crunch, and suggested
that the government should immediately disburse the money for the quake victims
and the NRB should inject liquidity to some of the banks.
He
said that long term refinancing to productive sectors can be another method of
solution.
President
of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) said
that the businessmen were ready to share the cost of bankers and urged them not
to seek ways to make higher profits in the time of trouble.
"The
way the banks are hiking the interest rate on loans will increase the gap
between them and the business community. I think you should also feel the heat
of the situation, why only the businessmen?" he questioned the bankers.
Chairman
of Hydro Committee at the FNCCI Gyanendra Lal Shrestha said that 2 per cent
increase in interest rate would lessen the profits by 14 per cent in the hydro
sector which might make the return almost nill.
Executive
director of the Banks and Financial Institution Regulation Department of the
NRB Narayan Prasad Poudel criticized the banks for being insensitive about the
situation while doing business.
"In
the last five months, deposits increased by Rs. 114 billion while loans of Rs.
158 billion were mobilized. The banks should have balanced it and estimated the
situation of the coming days," he said.
He
said that the liquidity problem would be there for about one and a half months.
FNCCI
vice president Shekhar Golchha said that the banks had been trying to pass the
burden they created to the entrepreneurs.
"Banks'
inability will raise inflation and the common consumers will suffer," he
said.
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