Bank deposits down by Rs 16 billion

Deposits at commercial banks fell by Rs 16 billion over the first fortnight of the fiscal year 2013/14. Commercial banks had reported total deposits of Rs 1000.17 billion at the end of the last fiscal year when huge amount of public money flowed into the market due to rapid pace of development works. Now, the development activities have come to a standstill with the beginning of new fiscal year leading to increasing withdrawal of deposits from the banks. “Besides, deposits generally at the end of the fiscal year as banks try to meet annual deposit and lending targets using different measures,” Bhuwan Dahal, deputy CEO of Sanima Bank, told Republica. “After the new fiscal year begins, customers withdraw money as it will take some time for government fund to flow into the public.” Dahal also said bank deposits fell following the allotment of shares under Mega Bank´s Initial Public Offering (IPO). Shares of Mega Bank were oversubscribed by 15 times to Rs 10 billion which was parked for a few weeks in the banks. Similarly, loan investment of banks over the period dropped by Rs 7 billion to Rs 747 billion. A banker said customers have not put fresh demand for loan, hoping that interest rate on credit will come down as the new monetary policy that have made it mandatory for banks to maintain 5 percent spread rate -- difference between interest rate on lending and deposit -- and reduced Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). “We are hopeful that loan investment will increase once the interest rate comes down,” the banker said. Some banks have already started to offer lower interest rates, while some have indicated that they are lowering interest rates by 1 to 2 percentage points. Meanwhile, deposits at commercial banks increased by Rs 145 billion, including Rs 75 billion in the last month alone, in 2012/13 compared to 2011/12. The government released the payment for construction works toward the end of the fiscal year which ultimately resulted in the increasing deposits at commercial banks.