Depositors transferring savings to older banks

KATHMANDU, JUN 11 -

Alarmed by the trend of banks and financial institutions (BFIs) getting into trouble one after another in recent weeks, depositors have started transferring their savings to older banks thought to be safer.

As a result, government-owned and older banks like Rastriya Banijya Bank, Nabil, Standard Chartered and Himalayan have started to witness a growth in their deposits of late.

Older banks offer a relatively lower rate of interest on deposits compared to newer banks and B and C class financial institutions. However, bankers admit that they have been receiving more deposits in recent days. "Of course, there has been a diversion of deposits," said Ashoke Rana, president of the Nepal Bankers Association and chief executive officer of Himalayan Bank. "People want to deposit money in more secure banks than those offering a higher interest rate."

Over the last three months, five financial institutions have landed in trouble starting with Gurkha Development Bank, United Development Bank and Nepal Share Market and Finance.

Himalayan Bank is among those witnessing a rise in deposits. "Our deposits have grown since the last five months," said Rana. "There has been a sudden rise in the number of institutional depositors in our bank since the last three weeks following the incidents of a number of financial institutions facing problems."

According to him, institutional depositors have now stopped bargaining for a higher rate of interest. "Some of them have accepted a rate of interest lower than 12 percent."

Rastriya Banijya Bank has also benefited from the ongoing mess in some financial institutions. "Deposits have grown Rs 2-3 billion to Rs 65 billion in the last month," said Ram Prasad Adhikari, chairman and managing director. "However, we are not sure whether it is an impact of the crisis in some BFIs." However, its total deposit base is still low compared to mid-July 2010 when it amounted to Rs 68 billion.

It is a similar story at Nabil Bank, the first joint venture bank in the country. "There has been a diversion of around Rs 1 billion," said general manger Amrit Charan Shrestha. Nabil's deposits have grown to around Rs 50 billion from Rs 47 billion in the third quarter of the current fiscal year. "Our deposits grew as both institutional and individual depositors opted to deposit money in older banks," said Shrestha. He added that people with multiple accounts in different BFIs were closing their accounts in institutions they though were at risk and putting their money in older banks.

Standard Chartered has also witnessed a steady growth in its deposits over the last few months. "It is too early to say that it is due to the diversion of deposits from B and C class institutions to our bank," said Diw-akar Poudel, head of corporate affairs.

Posted on: 2011-06-11 08:54

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