Banking and Financial Institutions (AFIs) are experiencing a massive liquidity crunch in recent months despite raising interest rates on deposits. As instructed by Nepal Rastra Bank, 27 commercial banks, which offered 10.05% interest per annum on term deposits before February 1, are now offering 11.03%. The interest rate on savings accounts also increased to 6.03%. Despite these changes in interest rates, the collection of deposits in CIBs did not increase as expected. According to the latest data provided by the Nepal Bankers Association (NBA), the total deposits of 27 commercial banks stood at 4.313 trillion rupees on February 25, compared to 4.311 trillion rupees recorded on February 11. interest rates remain high. The increase in interest rates by commercial banks will have a direct impact on the thousands of cooperatives, which already offer more than 16%. Normally, deposit collection increases with rising interest rates when people hold money at home rather than keeping it in banks. Weak deposit collection in banks can also be attributed to unemployment among middle-income people due to the coronavirus pandemic over the past two years.
Bankers said the massive imports of goods coupled with the drop in remittances in recent months are the main factors behind the ongoing liquidity crunch in the market. Imports of essential goods, particularly in the construction sector, surged following the easing of restrictions related to COVID-19. Due to the shortage of liquidity, the CIBs were able to disburse loans to the tune of only 10 billion rupees, which is nominal when the sum is distributed among the 27 banks. In order to ease the liquidity crunch, the central bank injected an additional Rs 4.732 trillion into the financial market during the current fiscal year. The central bank has mainly focused on stabilizing external factors by managing domestic demand.
Nepal’s financial situation will deteriorate further if remittances continue to fall, as has happened in recent months. The Ministry of Finance believes that remittances have declined after Nepalese also started buying cryptocurrency through illegal channels. But the government has no strategy to control this illegal transaction. The country will also have to spend more foreign currency to pay the bill for imports of petroleum products whose prices have already risen to US$100 per barrel of crude oil on the international market due to the war in Ukraine and the disruption of their supply in oil-producing regions. If Nepal Oli Corporation spends most of the hard-earned foreign currency on importing fossil fuels, the country’s balance of payments will be negative and it will not be able to buy other goods needed to run the system. economy. It is therefore imperative that the government reduce the heavy taxes imposed on petroleum products so that people can afford to buy them. The government should also strictly ban the import of non-essentials and other luxuries until financial health improves for the better.
It is not uncommon to see cows and bulls sitting in the middle of a busy road in this part of the world and obstructing traffic. The Kathmandu municipality has been trying for ages to find a solution to the problem, but to no avail. Today, Kathmandu Metropolitan City and Dakshinkali Municipality have developed a joint program to operate a stray livestock management center. Fingers crossed that this finally sweeps the stray cattle from the streets of the capital. The center that will be housed in Dakshinkali will help to rescue, house, feed and provide veterinary services to livestock abandoned on the streets of the capital.
Although the municipalities are responsible for taking care of all stray animals under their domain, their burden would have been less if the owners of the abandoned cattle had also shown some responsibility.
Once unproductive, farmers abandon these cows and bulls on the streets, forcing them to seek grass and vegetables in parks and open spaces or markets. It will cost KMC money to run the Dakshinkali center. Instead of looking to KMC for funds, if the center can convert all the cow dung into compost fertilizer and sell it, it should cover its running costs.
A version of this article appears in the March 3, 2022 printing of The Himalayan Times.