In the midst of this gloomy scenario, everyone is pinning their hopes on an effective vaccine that can bring the pandemic under control
After facing a liquidity crunch for years, banks are now flush with cash, thanks to the coronavirus pandemic that has brought economic activities to a standstill. According to Nepal Rastra Bank, there is excess liquidity of Rs 170 billion in the banking sector right now — even after the central bank mopped up Rs 21.8 billion from the banks to manage the surplus liquidity — as there are no avenues for investment.
Of course, the surplus liquidity in the banks should bring cheers to the business community as the bank interest rates on loans have come down, from 12 per cent in mid-September last year to 9.8 per cent in mid-September this year. This should come as a big relief for the businesses that are facing multiple problems, with many of them already on the verge of closure. But then in this period of uncertainty, the question is, invest where? On the other hand, however, the excess liquidity is bad for the banks and the depositors. The banks’ profits are down, so are the average interest rates on the deposits, which came down to 5.45 per cent in mid-September from 6.75 per cent a year back.
Liquidity started piling up in the banks soon after the government clamped a months-long nationwide lockdown on March 23 this year, shutting down all industries, businesses, transport and educational institutions.
With everyone literally holed up inside their homes, naturally there was no demand for loans to expand business.
But with the rise in imports in recent months following the easing of the lockdown, there has been a spurt in lendings, helping to lower the surplus liquidity in the banks. But for all the surplus liquidity with the banks to be managed, the core business activities will need to pick up so as to create a demand for investment.
The central bank’s intervention to mop up certain amounts of funds from the banks can only be temporary and not a solution to the problem.
But the issue is, how long is the business uncertainty going to last? Especially with the onset of winter, there has been a spike in coronavirus cases across the world, from the US to Europe and India and now even China. As a result, many countries have re-introduced lockdowns to stop the spread of the virus in the community. In the midst of this gloomy scenario, everyone is pinning their hopes on an effective vaccine that a host of countries are currently working on to bring the pandemic under control and resume normal life as before. A British drugmaker, Astra- Zeneca, has already announced a vaccine is ready for the world and is to roll out vaccines in bulk in the first three months of the next year. The British government is already hopeful that life will bounce back to normal sometime after Easter in April next year. So in all optimism, we too can expect life and businesses to start functioning normally by the middle of the next year. There will thus be a demand for new loans, helping to absorb the enormous liquidity available with the banks. But the central bank must see to it that the loans go to the productive sectors that create jobs in the country and not squandered on the import of luxury goods consumed by a few.
Grade XII exams
The National Examinations Board (NEB) finally conducted the examinations of Grade XII from yesterday, seven months behind schedule, due to the outbreak of the coronavirus. The students were allowed to take exams only for 40 per cent of the marks, reducing the exam time to 1.5 hours from the usual three hours. The exams were held by adopting the health protocols set by the NEB. The NEB will provide 40 per cent marks on the basis of the marks obtained by students in Grade XI and remaining 20 per cent marks on the basis of internal evaluation of students.
The NEB has also made arrangements under which the students can sit for the exams on any other day if they have tested positive for COVID-19.
Tens of thousands of students from schools to universities have been deprived of regular classes and timely exams due to the pandemic. As the first day of the Grade XII exams went smoothly across the country, the school and university-level exams should also be held by learning lessons from the NEB exams and by adhering to the health and safety protocols to be developed by the concerned examination boards. At the same time, the concerned exam boards should not take extra time in publishing the results to make up for the time lost by the students.
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