Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Commercial banks have further reduced interest rates for the month of Poush after Nepal Rastra Bank (NRB) lowered its policy rate through the mid-term review of the monetary policy.
NRB reduced the policy rate from 4.50 percent to 4.25 percent, prompting banks to revise deposit rates downward amid excess liquidity and weak credit growth. As a result, interest rates published by banks for Poush are lower compared to Mangsir.
According to interest rate disclosures by 20 commercial banks, the average maximum interest rate on individual fixed deposits has declined by 0.20 percentage points in Poush. The average maximum rate stood at 5.0405 percent in Mangsir, which has dropped to 4.834 percent in Poush.
With the decline in individual fixed deposit rates, interest rates on savings deposits and institutional fixed deposits are also expected to ease. Lower deposit rates reduce the base rate, which in turn leads to a decline in lending rates. Notably, the maximum interest rate on individual fixed deposits has now fallen below 6 percent across all banks.
Global IME Bank, which offered a maximum of 6 percent interest on individual fixed deposits in Mangsir, has reduced the rate to 5.5 percent for Poush.
Compared to Mangsir, 13 banks have reduced their maximum interest rates on individual fixed deposits in Poush, while seven banks have kept their rates unchanged.
Banks that lowered rates include Agricultural Development Bank, Everest Bank, Nepal Bank, Laxmi Sunrise Bank, Prabhu Bank, Standard Chartered Bank Nepal, Rastriya Banijya Bank, Nabil Bank, Global IME Bank, Prime Commercial Bank, Kumari Bank, Sanima Bank and Nepal SBI Bank.
Banks that kept rates unchanged are Machhapuchchhre Bank, NIC Asia Bank, Siddhartha Bank, Himalayan Bank, Nepal Investment Mega Bank, NMB Bank and Citizens Bank.
Banks have generally been offering lower interest rates on short-term fixed deposits and relatively higher rates on longer tenures. However, abundant investable funds and sluggish loan demand have continued to exert downward pressure on interest rates.
In recent months, NRB has been absorbing excess liquidity from the banking system through various instruments, including deposit collection and standing deposit facilities, to manage system liquidity and interbank interest rates.
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