Positive indicators have emerged recently in Nepal's economy, which has been plagued by the global Covid-19 (Corona) infection. The Corona Epidemic Challenges to Business Since the Beginning of the Fiscal Year The sluggishness in the corona outbreak in recent months, and the government's effective measures in importing and distributing treatments and vaccines, have had a positive effect on business psychology.
Due to the improvement in the situation, banks and financial institutions have returned to normalcy, while the banks, which have been slow in extending credit for a long time due to the Kovid-19 epidemic, have intensified their business activities. The gradual recovery in the economy after the lifting of the ban on the Corona transition is expected to accelerate in the coming days. The expansion of banks' business seems to have returned to normal as the economy has started to improve due to increase in exports, reduction in inflation and increase in remittances. Credit flow of banks and financial institutions, economic activity, revenue and tax collection, economic growth have shown positive signs, while trade deficit has been declining as imports and exports have become more balanced. Due to the increase in credit flow, various sectors of investment have become enthusiastically active. The overall economic sector of the country has started moving as commercial banks have invested Rs 27 billion in loans in the last one week. As of March 29, commercial banks have collected Rs 3.89 trillion in deposits and Rs 3.362 trillion in loans. Looking at the positive results brought to the economy by the flow of credit, it is seen that Nepal does not have to wait long to heal the wounds of Corona.
Debt flow in itself is the first condition for activating economic activity, which contributes to economic growth but the fact that credit has gone to the sector affects the targeted economic outcome. If the mainstream of credit can be attracted to the productive sector rather than real estate and vehicles, pleasant economic results can be brought. Despite the increase in credit investment as banks began to increase investment as business, markets and public life returned to normal due to the Corona epidemic, the growth rate of deposit collection has been low during the period. As only Rs 11 billion was added to the banking system in the same period of one year, there is a possibility of lack of liquidity in the bank. If there is no balance between credit flow and deposit collection, it will be difficult to prevent negative consequences. Banks and financial institutions should also pay attention to the past trend of increasing interest rates due to lack of liquidity of deposits.
Banks should not delay the flow of credit to the designated areas as the facilities including refinancing provided by the government have brought positive results in the economy. The country's desire for prosperity will not be fulfilled if there is no credit in the agricultural and productive sectors but excessive credit flows in the business of vehicles and luxury goods. As the private sector will create more employment, creating an environment for simple credit flow to the private sector will ultimately help employment and economic growth, so it is equally necessary to create an investment environment by maintaining a balanced and stable interest rate between deposits and loans. In the past, some banks and financial institutions have maintained higher spreads than prescribed and increased interest rates, so the situation of injustice against the borrowers should not be repeated. Nepal Rastra Bank (NRB) has said that any bank or financial institution will take action if the spread between deposits and loans exceeds the stipulated limit. Cooperation and initiative of all financial institutions including Nepal Rastra Bank will be necessary to maintain investment friendly and credit expansion environment in the country.
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