Kathmandu, Oct. 28 -- Banks extended Rs141 billion in loans in the first quarter of the current fiscal year and collected Rs106 billion, according to the Nepal Rastra Bank.

This disparity has put the heat on banks amid a persistent shortage of loanable funds.

The central bank claims to have resolved the chronic liquidity shortage through monetary policy, but this has not happened in the domestic banking system. The shortfall in loanable funds raises the risk of soaring interest rates.

"Even though banks have enough funds at the moment, they could undergo a severe crisis if the situation does not improve even after Tihar," said Bhuwan Kumar Dahal, chief executive officer of Sanima Bank.

Dahal said the shortage of loanable funds in rece...