A new NRB directive says banks and financial institutions can now exclude long-term foreign borrowings of at least five years or more while calculating the CCD ratio.[break]
Till date, financial institutions that made borrowings from foreign institutions had to incorporate the amount as credit while calculating the CCD ratio.
“This provision, on one hand, inflated the CCD ratio figure of banks, and, on the other, limited their ability to issue additional credit,” Bhaskar Mani Gyawali, spokesperson of NRB, told Republica, expressing hope the “new facility would provide relief to some extent”.
Beginning mid-January, the central bank has made it mandatory for all banks and financial institutions to maintain CCD ratio of 80 percent.
The CCD ratio is calculated by dividing loans disbursed in local currency by the sum of local currency deposit and core capital - also known as tier one capital, which includes equity capital and portion of net income retained by institutions. This outcome is then multiplied by 100 and it should not exceed 80.
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