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Nepali financial institutions facing liquidity crunch

06-14-2011 14:44 BJT

KATHMANDU, June 14 (Xinhua) -- The beginning of July marked severe cash crunch amongst the banks and financial institutions after they reeled under the dual problems of liquidity crunch and loan recovery.

Vibor Development Bank and People's Finance went into serious liquidity crunch. However, this is not the first instance of liquidity crunch in the country.

"The situation is critical but there is still no reason to be anxious," experts have said.

Experts said the liquidity crisis was a result of quick profit motive rather than going for much reliable investments.

Talking to Xinhua on Tuesday, Radhesh Pant, Chief Executive Officer of Kumari Bank in Nepal said that the situation had arrived mainly because of two reasons -- the political instability and lack of proper monitoring over the financial institutions.

"The political instability causes an impasse at the policy making level, which discourages investment. And also, there are too many players in the banking sector right now and a proper monitoring system is lacking," according to Pant.

"We have 28 commercial banks, we have 60-65 development banks, more than 70 financial institutions," Pant told Xinhua.

"The government and the political parties should focus on the economy of the country while fixing their priorities for the next 5-10 years on how to develop Nepal. For instance, a focus on hydropower with strong strategy, which is bought in by all the parties so that in future, even when the government's changes, same objectives, and strategies are worked on," Pant said.

Likewise, he also said that the the other basic reason behind the crunch was the decelerating growth in the remittances.

The bankers and financial institutions have also blamed the government for its failure to promulgate the national budget on time and its lack of spending ability. The national budget was delayed by seven months in 2010 all of which has resulted in banks not being able to finanace automobiles, housing and real estate and other industries as well.

Talking to Xinhua, Bhaskar Rajkarnikar, senior Vice-President of the Federation of Nepalese Chambers of Commerce and Industry said that the current situation of liquidity crunch in the country has posed serious threats to the industrial sector of the country.



Editor:Zheng Limin |Source: Xinhua

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