Banks slash deposit interest rates as NRB adopts lenient policy stance

Credit crunch looms as commercial banks grapple with liquidity mismatch

KATHMANDU: Several commercial banks have initiated a decrease in their deposit interest rates following a more accommodating stance from the Nepal Rastra Bank (NRB) in its policy rate and bank rate during the initial quarterly review of the monetary policy.

Recent public notices issued by these banks reveal a reduction of one percentage point in interest rates for fixed deposits, bringing them down to as low as seven percent.

NIC Asia Bank, for instance, has adjusted its interest rate to 7 percent for fixed deposits with a maturity period of up to six months. Meanwhile, the interest rate for fixed deposits exceeding two years is set at 8.67 percent per annum. Similarly, NMB Bank has announced its intention to lower its interest rate from 9.76 percent to 9 percent.

Until recently, most banks were offering double-digit interest rates on deposits. However, they have now declared their commitment to transitioning to single-digit rates, effective from the upcoming Sunday.

Bankers suggest that the reduction in deposit interest rates signals an imminent decrease in the interest rates on loans offered by these banks. Nepal Bankers’ Association President, Sunil KC, stated that the banks are now in a position to lower interest rates due to the central bank’s more lenient policies.

In its recent monetary policy revision, the NRB decreased the bank rate from 7.5 percent to 7 percent, while the policy rate was also adjusted to 5.5 percent from the previous 6.5 percent.

This move is attributed to the ongoing economic slowdown, with the private sector consistently urging the central bank to adopt more lenient policies to bring down interest rates.

Over the past month, numerous banks have proactively reduced their interest rates after finding themselves with an excess of loanable funds. NRB records indicate that commercial banks have accumulated a total deposit collection of Rs 5.289 trillion, while their provided loans amount to Rs 4.407 trillion.

Fiscal Nepal |
Tuesday December 12, 2023, 10:48:03 AM |

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