Interest rate continue to remain higher this FY over the previous

KATHMANDU: The Nepal Rastra Bank (NRB) report shows that interest rates rose significantly in the current fiscal year (FY) in comparison to the previous FY.

In addition, the increase in the weighted average deposit rate is more than the lending rates of the commercial banks.

The deposit rate increased by 1.63 percentage points while the lending rate increased by 1.42 percentage points from mid-February 2021 and mid-February 2022.

The weighted average deposit rate increased to 6.49 per cent from 4.86 per cent and the average lending rate increased to 10.31 per cent from 8.89 per cent year on year (YoY) basis.

The rising interest rates indicated that the cost of funds has been rising which could affect credit growth and inflation in the future.

Meanwhile, the interbank interest rate of the commercial banks increased more rapidly than the other interest rates. It increased by 4.2 percentage point from mid-February 2021 to mid-February 2022. This showed that interbank lending activities went up to manage short-term funding among banks and financial institutions.

Similarly, some policy rates also increased in this FY. The fixed repo rate increased to 3.5 per cent from 3 per cent. Also, the fixed deposit collection rate increased to 2 per cent from 1 per cent. Meanwhile, the rate on standing liquidity facility and bank rate remained unchanged at 5 per cent.

However, the NRB did not change the refinance rates, as it became a crucial source of finance to support COVID-affected businesses. Both the special refinance and general refinance rates remained unchanged at 1 per cent and 3 per cent respectively over the current FY.

The interest on treasury bills also significantly increased. The interest on the T-bills (28 days) increased to 5.48 per cent from 0.82 per cent, 91 days T-bills increased to 5.32 per cent from 1.13 per cent, 182 days T-bills to 5.12 per cent from 1.55 per cent and 364 days T-bills to 5.29 per cent from 1.98 per cent in the period of mid-February 2022 from mid-February 2021.

Fiscal Nepal |
Monday March 28, 2022, 01:54:07 PM |


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