Commercial Banks Lower Deposit Interest Rates for Baisakh

Credit crunch looms as commercial banks grapple with liquidity mismatch

KATHMANDU: Commercial banks in Nepal have adjusted their deposit interest rates for the month of Baisakh (mid-April to mid-May), with most banks reducing rates compared to the previous month of Chaitra (mid-March to mid-April).

According to the latest interest rate table released by banks on Friday, the maximum average interest rate for personal term deposits has decreased by 0.19 percentage points.

In Chaitra, the maximum average interest rate across 20 commercial banks stood at 7.25 percent, which has now dropped to 7.06 percent for Baisakh. Thirteen banks have lowered their rates for Baisakh, while five have maintained them, and two have increased rates.

Notably, Everest and NMB have raised interest rates for Baisakh, while other banks have reduced them. Despite offering the highest interest rate of 8.54 percent in Chaitra, NIC Asia’s rate has fallen, with NMB offering the highest rate of 7.97 percent for Baisakh. Currently, no bank offers an interest rate on personal term deposits exceeding 8 percent.

The reduction in interest rates comes despite excess liquidity in the banking system, attributed to low credit flow. Banks are mandated to offer institutional interest rates one percentage point lower than the maximum personal term deposit rate, capping institutional rates at 6.97 percent.

Additionally, banks can only decrease savings and call deposit rates after reducing the maximum interest rate on personal term deposits, as per Nepal Rastra Bank (NRB) regulations.

The NRB aims to minimize interest rate fluctuations, allowing banks to adjust rates within a 10 percent range above the average of maximum rates from the previous month, as part of efforts to stabilize the financial sector.

Fiscal Nepal |
Friday April 12, 2024, 01:27:01 PM |

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