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present situation of Banking and financial instituitons of Nepal Cause and some remedies too..

Today when you deposit Rs. 1 lakh in a financial institution you receive Rs. 1 thousand 4 hundred as an interest but some years ago the interest you earned was no more than 8 hundred rupees.

Some time ago there was a liquidity crunch so, banking and financial institution raised the interest rate and started receiving deposits from the Public. In desire of getting higher interest people deposit their savings in such financial institutions which cannot preserve their deposits. They don’t watch the financial status of that company.

So, a Question may be raised, who are the persons responsible for this condition.???

* Main people responsible for this situation today are the board of directors of Banking institution and its management.

* Also, Nepal Rastra Bank the monitoring institution for the financial sector of Nepal is the prime organization responsible for this situation,

* The other reason for the creation of present situation of today’s banking sector is the false practice made in showing higher transactions and getting more profit in management committee.

* Similarly, the other reason for the creation of crisis of liquidity in present scenario of the banking sector is the failure of banking and financial sectors in failing to recover the debts in real state sector.

* The other reason is the lack of knowledge of the Managing personnel in banking sector. Their only motive is to earn profit at any cost.

* Disbursing the credit in unsystematic way without adequate collateral.

* Financial Institutions directors creating fake partners and disbursing loan to themselves and earning unlimited profit.

* Monitoring institution failing to make an effective supervision in banking and financial sector.

* The Auditors general failing in inspecting the balance sheet of the banking institutions.

*** Problem does not occur in days or in short span. It is the outcome of the previous un inspected mistakes. So this problem is not the outcome of short period.

If budget had been allocated in time, this situation had not been created. Government failed to allocate to disperse budget in different fields. So there was no flow of money in the market. That helped in creating liquidity crisis.

Remedies for the liquidity crisis:

This problem is created because of NRB. So, it must take different steps to maintain liquidity crisis through different monetary tools.

The other reasons for Banking and financial institutions for not able to maintain the liquidity can also be summarized as below:

 Political instability

 Budget not allotted in time

 Government failing to make capital Expenditure.

 Lack of clear monetary policy.

 Load shedding, Banda, Hadtal and so on.

 Labor problem in different industries.

* These problems cannot be solved at once so, the key player in solving this problem will be NRB.

* Depositors must deposit watching the organizations ability in keeping your deposits safe. Similarly, banking and financial institutions should not accept deposit beyond their capability.

* Investment in real state should be reduced.

* Those land and building which gets the value below the market price should be sold and hold the money.

* Good governance must be implemented in monitoring organization.

* When Rastra bank withdraws money from Development banks and small financial institutions in large sum that conveys negative message to other institutional depositors.

#  Banking and financial sectors have to earn trust from the depositors and clients.

Big debtors and creditors must be kept under close supervision.

These remedies might be the solution for the solving of the liquidity crisis of the financial instituions.

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