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Govt. Allows Banks To Use Pp To 80 Percent Of Funds Allocated To Local Bodies

Govt. Allows Banks To Use Pp To 80 Percent Of Fund
  Kathmandu, Nepal      December 21 2021

Kathmandu, Nepal, December 21, 2021: Owing to the liquidity crunch, the government has allowed the banks and banking institutions to use up to 80 percent of the funds released by the federal government for the local governments in their credit-deposit (CD) ratio.

Revising on the existing provision, the Ministry of Finance (MoF) has written a letter to the Nepal Rasra Bank (NRB), the central bank of Nepal, to allow the banks and banking institutions to extend the ceiling.  The provision will be effective till the end of ongoing fiscal year 2078-079. 

The government has taken the move with the aim to ease the ongoing shortage of investable funds in the banking system. As most of the banks and banking institutions have crossed the NRB fixed limit of 90 percent on CD ratio, issuance of new loans was stopped since few months.

As of now, banks and banking institutions have been permitted to use only 50 percent of such grant amount. With the new provision, the banks and banking institutions can now use up to additional 30 percent of the funds released by the federal government for the local governments in their CD ratio. 

As the government has already allocated a total fund of Rs 387.30 billion to the local governments for the current fiscal year, the banks and banking institutions will be able to mobilize additional funds worth more than Rs 100 billion counting as their deposit.