Deposit Mobilization of Commercial Banks increased by Rs. 19.8b

The deposits mobilization of commercial banks in the first four months of 2009/10 increased by Rs.19.8 billion (3.6 percent) amounting to Rs.569.7 billion.

The total deposits had increased by Rs.27.2 billion (6.5 percent) in the corresponding period of the previous year. Similarly, credit to the private sector expanded by 10.1 percent (Rs.41.0 billion) in the review period compared to an increase of 9.2 Percent (Rs.30.2 billion) in the corresponding period of the previous year, the NRB report said.

Of the private sector credit, credit to the production sector witnessed a lower rate of growth in the review period. The credit to that sector increased by 4.1 percent (Rs.3.6 billion) in the review period compared to a growth of 8.3 percent (Rs.6.3 billion) in the same period of the previous year.

In the review period, the credit to wholesale and retail business as well as finance, insurance and fixed assets increased by 14.9 percent (Rs.10.3 billion) and 21.8 percent (Rs.8.5 billion) respectively.

The credit to these sectors during the corresponding period in the previous year had increased by 4.1 percent (Rs.2.8 billion) and 6.9 percent (Rs.5.1 billion) respectively.

Likewise, the credit to the service sector registered a growth of 10.4 percent compared to a growth of 8.7 percent in the same period last year. Although the growth of the credit to real estate sector decelerated, the volume of such credit flow marginally increased in the review period than that in the same period of the previous year.

The credit to such sector stood at Rs.5.5 billion in the first four months of 2009/10 compared to Rs.5.5 billion in the same period a year ago.

Liquidity position of commercial banks

The liquid assets of the commercial banks declined significantly in the review period.

In the first four months of 2009/10, such assets declined by 10.6 percent to Rs.167.8 billion against a growth of 2.5 percent amounting to Rs.154.9 billion in the same period of the previous year.

Of the components of liquid assets, liquid fund declined by 19.5 percent in the review period. Similarly, balance held abroad by commercial banks declined by 9.9 percent to Rs.48.1 billion, while the investments on government securities increased by 3.9 percent in the review period.

The higher growth of loans and advances relative to deposit mobilization mainly attributed to the tightening of liquidity position of the banks.

In the review period, the loans and advances of the banksincreased by 8.7 percent (Rs.45.0 billion). As a result, the credit deposit ratio increased to 85.8 percent as at mid November 2009 from 81.2 percent in mid-July 2009 while the liquidity deposit ratio declined to 29.5 percent from 34.1 percent in mid-July 2009.