Excess Liquidity Poses Challenge for Nepal's Banking Sector Amid Low Credit Demand
Summary
Nepal's banking sector faces challenges managing excess liquidity due to low credit demand, despite low-interest rates and increasing deposits. The central bank is promoting loan uptake to stimulate economic growth amid political instability.
Key Points
- Nepal's banking sector is facing challenges due to excess liquidity amid low credit demand despite low-interest rates.
- Nepal Rastra Bank manages liquidity by withdrawing and injecting funds to stabilize the financial system.
- Political instability and a lack of investment-conducive environment have reduced credit demand, causing accumulation of deposits.
- Government and central bank initiatives aim to boost credit demand through concessional loans and reconstruction support after recent protests.
