Nepal Rastra Bank intervenes after banks raise interest rates on savings

KATHMANDU: Nepal Rastra Bank (NRB) has directed the banks and financial institutions to return the interest rate imposed on savings from 18 October 2021.

NRB has intervened in the interest rates of banks by issuing a three-point directive on Tuesday night.

Most of the banks had increased interest rates on savings and term deposits with effect from 18 October 2021 Some banks had fixed interest rates on personal and institutional rates above 11 percent on time. That is why the NRB issued a directive on Tuesday night and tightened the interest rate.

According to the directive, banks and financial institutions will be able to change the interest rate of any type of deposit by only 10 percent of the previous month’s interest rate.

That is, banks and financial institutions will now have to set a new interest rate (for October) based on the October interest rate. It will not be possible to make the interest rates below 10 percent in September.

Similarly, the interest rate on institutional term deposits (including bidding) should be at least one percent lower than the maximum interest rate on term savings to the public.

NRB has directed to make public the new interest rate on its website by Wednesday, October 20, 2021, by revising the interest rate of banks and financial institutions.

The directive also states that the new interest rate should be published in newspapers by 22 October 2021.