Banks slash deposit interest rates in response to NRB’s policy adjustments

KATHMANDU: In response to Nepal Rastra Bank’s (NRB) recent adjustments to the policy rate and bank rate, commercial banks have announced revised interest rates on deposits for the upcoming month of Paush (mid-December to mid-January).

Eighteen banks have publicly declared a reduction in interest rates for both individual and institutional deposits compared to the previous month of Mangsir (mid-November to mid-December). Conversely, Prabhu Bank and Sanima Bank have chosen to maintain their interest rates for the review period.

The average interest rate across commercial banks has experienced a decline of 0.62 percentage points, reaching 8.99 percent for the upcoming month starting from Sunday. Following this revision, the prevailing average interest rate stands at 9.91 percent per annum.

Himalayan Bank stands out with the most significant reduction in interest rates, slashing its maximum interest rate on personal term deposits from 10.603 percent to 8.603 percent for the next month. Similarly, Citizens Bank has lowered deposit interest rates by 1.35 percentage points, while Everest Bank, Global IME Bank, Laxmi Sunrise Bank, Machhapuchhre Bank, and Nepal SBI Bank have all implemented a reduction of 1 percentage point.

Three state-owned banks, namely Nepal Bank Limited, Agriculture Development Bank, and Rastriya Banijya Bank, have adjusted their interest rates on individual savings to 8.55 percent, 9.01 percent, and 8.61 percent, respectively. Depositors will now receive the highest interest by depositing their money in Prime Commercial Bank.

The private sector, citing the ongoing economic slowdown in the country, has long urged the central bank to adopt a more lenient policy to lower market interest rates. Following the NRB’s flexible stance in the revised monetary policy last week, commercial banks have been prompted to reduce their interest rates. The central bank has lowered the bank rate from 7.5 percent to 7 percent, and the policy rate has been revised to 5.5 percent from the existing 6.5 percent.

Over the past month, several banks have already initiated interest rate reductions as they found themselves with an excess amount of loanable funds. According to NRB records, commercial banks hold a total deposit portfolio of Rs 5.989 trillion while providing loans amounting to Rs 4.989 trillion.