The rise in inter-banking lending is a testimony to the fact that the liquidity -- the standby resources held by the banks for investments -- is shrinking, a banker told myrepublica.com. But he was quick to add that it was too early to conclude that it will put immediate impact on deposit and lending rates.
"Yes, there will an impact on lending and deposit rates if the high inter-banking rate continues for another three to four weeks," the banker said.
Though a slight liquidity shortage is a usual post-festival phenomenon in Nepal that used to last for up 10 days, this time it has been lengthening surprisingly and the market is still experiencing liquidity shortage even though the festival ended about two weeks back, added the banker.
According to an official of Nepal Rastra Bank (NRB), the rising discount rate in 91-day treasury bills is another indication of deepening shortage of liquidity.
The NRB offered treasury bills worth Rs 500 million on Monday. But the bid amount submitted by the banks totaled Rs 1,150 million and the discount rate has also gone up to 5.36 percent from last week´s 4.48 percent.
Bankers said the latest shortage of liquidity was also an impact of chronic note shortage that the country witnessed just before Dashain, Nepal´s biggest festival. The demand of liquid cash grew rapidly after the festival as the banks are demanding more cash to settle intra-branch flow of funds made during the crisis.
“There has also been change in the pace of deposits coming back to banks compared to previous trends,” said the banker, adding that individual cash holding volume seems to have been increased due to the shattered confidence of depositors as they had to struggle to withdraw cash just before the Dashain festival.
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