We would like to thank for
their suggestions and help
 Mr. Achyut Pant
 Mrs. Anita Pradhan Nepal
 Mr. Punaram Ghimere
Methodology
 Internet
 NRB report.
 Various Books
 Newspapers.
Definition:
A state in which there is a short
supply of cash to lend to business
and consumers and interest rate is
high. There is less availability of
credit
Background :
Per –capita income of an average
Nepali is about $300.
Less income , so less saving which
automatically leads to less
investment
Backbones of Nepalese Economy
 Agriculture
 Remittance
 Foreign Aid
 Tourism
Factors Indicating Crisis : Reserve Money decreased by 2.9% in
comparison to last year.
 The Inter Bank Transaction Interest
Rate has increased up to 12% to 14%
 Liquidity Assets declined by 11.1%(
167.12 billion)
Probable Causes:Low increasing rate of
REMITTANCE
Remittance has just increased by
10.4 %
Last year it was 65.8%

Difference in Import and Export
Export has declined by 18.7%
Import has risen up by 32.8%
About 8 billion money has frozen in Hongkong to
import wool.
Increased Living Standard:-
People’s living standard has increased.
So they consume more and more of
luxurious goods, which are generally to
be imported. Like Cars, Mobiles etc.
This results in outflow of cash.
Investment greater then the deposit.
Deposit about 40 billion while investment is
75 billion
Credit increased by 13.4% ( about 54.38
billion)
last year it was 10.2%(31.4 billion)
Investment in Unproductive sector
Large percentage of investment is done in the
unproductive sectors like Real Estate, Gold,
Luxury Goods like Cars, Mobiles etc.
Credits in Productive Sector increased by just 8.2%
Latest report says that Investment in Gold
increased from 11 Arab to 33 Arab
Investment done in Foreign Land
People feel safe when they do investment in foreign
countries, especially in India.
Outflow of cash to India is high due to investment in
programs like mutual funds.
Illegal Hundi of Money to
Foreign countries
Increased Holding Money
People feel safe to have money in hand rather than
bank thinking won’t get money when needed.
About 2 crore cash is frozen in ATMs machine.
False Advertisement or News
The more and more attention of media
regarding crisis and their analysis has made
people more suspicious . So they are
withdrawing money from the bank.

Government’s Fault.
Budget Delayed by 5 months.
Money is frozen with government as no big
expenditure of government in comparison to its large
collection

Political Instability
Effects:Less availability of loans in market.
High inter banking transaction interest rate
High Interest Rate
Steps to remedy it.
 NRB injected about Nrs. 20 billion through Repo.
 NRB strictly prohibited to invest more then 40% in
real state and housing loan.
 NRB has seek help from World Monetary Fund incase
of emergency.
 Government decided to invest in development projects
Conclusion:Though factors like decreasing remittance
rate, increasing investment in
unproductive area will increase economic
crisis. But also experts say still Nepali is not
really in crisis. But, if ongoing condition
continues, there will really be economic
crisis. So more effective steps are expected.
Data and figures presented in this report are taken
from the of Nepal Rastra Bank, various reports and
newspaper.