ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Liquidity will increase in the market.
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Liquidity will decrease in the market.
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Liquidity will not be changed in the market.
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None of the above.
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Detailed explanation-1: -Nepal Liquid Assets Ratio stood at 7.7 % in Jan 2023, compared with the previous figure of 7.3 % in Dec 2022 See the table below for more data.
Detailed explanation-2: -Excessive liquidity destroys the profitability of the commercial bank as it reduces the return on assets. Similarly inadequate liquidity deteriorates bank’s credit standing that would lead to forced liquidation of bank’s assets and affects the reputation of the banks.
Detailed explanation-3: -The average liquidity ratio of the sample banks is noticed to be 22.2663 percent with a minimum value of 10.98 percent and maximum value of 37.52 percent. Capital ratio ranges from minimum value of 4.68 percent to maximum value of 16.57 percent with an average of 8.7397 percent.
Detailed explanation-4: -81. A provision will be made whereby the commercial banks need to maintain the statutory liquidity ratio (SLR) of 12 percent and development banks as well as finance companies need to maintain 10 percent from mid-January 2023.