Kathmandu. Although there is a lot of liquidity in the financial sector, banks have stopped taking fixed deposits (FDs) due to limited investment opportunities. Due to the decreasing loan investment, the banking sector is reluctant to take money in institutional fixed deposits.

The director of a cooperative company says, “At present, the banks are not refusing to accept the deposits of institutional investors at an interest rate of 2.5 to 2.75 percent. There is also a need to use power to keep deposits in the bank.

There is a need to use power to continue the deposits kept in the bank. He says that the bankers, who once used to harass depositors to take deposits, are now not showing much interest in coming to collect deposits.

Depositors say that there is a need to keep the deposits of all institutional investors involved in government corporations, insurance sector and cooperative sector in banks. Due to the slowdown in the economy in the last few days, the bank’s credit investment has been declining.

The investment sector is demoralised due to various challenges to the economy, such as the Zenji movement, which has not been able to bear the brunt of the coronavirus pandemic. As a result, the demand for credit in the private sector has decreased.

Lack of imports, lack of activities in the construction sector, and lack of timely government spending have led to a decrease in loan investment from banks in recent times. As a result, there is a pile of investable money in banks and financial institutions. As a result, the interest rate on loans given by banks to their depositors is declining, while banks are not in the mood to accumulate more deposits.

According to the Nepal Rastra Bank, deposit of Rs 7.479 trillion has been collected and Rs 5.636 trillion has been disbursed till Tuesday. As of Tuesday, the CD ratio of banks (loan-deposit ratio) stood at 74.49 percent. As per the provision made by Nepal Rastra Bank, banks and financial institutions can invest in loans up to 80 percent of CD ratio.

Bankers now have a lot of liquidity in all banks. There is no need to pay high interest on FDs as the demand for loans has decreased. A banker says that many banks are not in the mood to take new FDs. He says that it is difficult to renew the old FDs.

Similarly, as of Tuesday, the bank’s interest rate on deposits stood at 2.75 percent in the second half of the current fiscal year. Various ministries, departments, and offices of the Government of Nepal operate their revenue and funds through banks. Public institutions such as Nepal Electricity Authority, Nepal Oil Corporation, Nepal Telecom, and Civil Aviation Authority also deposit large amounts of money in banks.

Similarly, Employees Provident Fund, Citizen Investment Trust, Social Security Fund and other funds also keep a large part of their funds in the deposits of commercial banks. These entities are a long-term deposit source for banks. Both life and non-life insurance companies deposit their collected premium amount in banks. On the other hand, large cooperatives also invest in commercial bank deposits.

If the bank stops keeping money in APD or makes the interest rate cheaper, the profit and other indicators of the above-mentioned institutions will fall. Insurance companies have collected Rs 677.36 billion in the second months of the current fiscal year.

As of mid-November, the interest rate on deposits of institutional investors of banks stood at 3.65 percent. The interest rate on deposits of institutional investors of banks decreased by 0.22 percent in a month. Which will have an impact on the profit of the insurance company. When the profit of the insurance companies decreases, it also reduces the bonus of the insured.