Nepal Rastra Bank (NRB) officials, who have been keeping track of net money availability and commitments of the banks, told Republica that the banks have presently reported a shortfall of almost Rs 4 billion in liquid money.[break]
They attributed the situation to last week´s issue of development bond, under which the central bank had mopped up about Rs 3 billion from the system.
“The sudden deepening of liquidity problem has to do with that operation,” said a source.
Although the central bank re-injected Rs 3 billion in the market against the collateral of government securities, average inter-bank rate -- the interest rate at which banks lend to each other -- jumped to 12 percent on Tuesday. The rate had dropped to 8 percent about a month ago and had stood at 10.98 percent on Monday.
“The rise in inter-bank rate despite repo indicates how worse the banks have been hit over the last couple of days,” said Sushil Maharjan, chief at Treasury Department of DCBL Bank.
The liquidity crunch had its impact on interest rates that the banks quoted for treasury bills (TBs) on Monday, when the central bank carried auction to renew TBs worth over Rs 5 billion. On the day, the weightage average discounted rate that the banks quoted for 91-day TBs had jumped to 9.27 percent. The banks had quoted weightage average rate of 8.54 percent for 91-day TBs on December 28, 2010.
“The discounted rate jumped by almost a percent in just seven days. This indicates how grim the situation in the market is,” said the source.
The inter-bank rate had jumped to as high as 13 percent when the banks plunged into severe liquidity crunch last year. But by September this year, when banks returned to normal operations, the rate had eased to as low as 3-4 percent.
This had raised hopes among entrepreneurs and consumers that the banks might soon lower the lending rates. However, consistent prevalence of liquidity crunch over the last three months and latest worsening of situation means there will be no respite for borrowers. It is unlikely that the interest rates will go down anytime soon.
The situation, however, might bring cheers to the depositors. However, as bankers are preparing to control prices by imposing an unnatural limit on the savings rates, they too might find themselves deprived from enjoying high interest return.
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