Commercial Banks reduces deposit rates further in Ashadh; Average individual FD return falls to 4.27%

KATHMANDU: Nepal’s commercial banks have further lowered fixed deposit (FD) interest rates for the month of Ashadh, reflecting continued excess liquidity in the banking sector and weak demand for credit.

The revised rates, effective from Ashadh 1, show that most banks have reduced interest rates on both individual and institutional fixed deposits, making bank savings less attractive for depositors while potentially lowering funding costs for lenders.

According to the latest interest rate disclosures published by commercial banks, the average interest rate on individual fixed deposits has declined by 0.07 percentage points to 4.27 percent for Ashadh. The average rate stood at 4.34 percent in Jestha.

Similarly, the average interest rate on institutional fixed deposits has fallen by 0.02 percentage points to 3.18 percent from 3.20 percent a month earlier.

Seven Banks Reduce Deposit Rates

Among Nepal’s 20 commercial banks, seven have lowered their deposit rates for the new month. These include:

• Kumari Bank
• Laxmi Sunrise Bank
• Prime Commercial Bank
• NMB Bank
• Standard Chartered Bank Nepal
• Himalayan Bank
• NIC Asia Bank

The reduction comes as banks continue to hold significant excess liquidity, reducing the need to compete aggressively for deposits.

Thirteen Banks Keep Rates Unchanged

Meanwhile, 13 commercial banks have decided to maintain their previous rates. These include:

• Agricultural Development Bank
• Everest Bank
• Nepal Bank
• Nepal SBI Bank
• Global IME Bank
• Citizens Bank International
• Prabhu Bank
• Machhapuchchhre Bank
• Siddhartha Bank
• Nabil Bank
• Sanima Bank
• Rastriya Banijya Bank
• Nepal Investment Mega Bank

Impact on Depositors and Borrowers

The continued decline in deposit rates signals a broader easing trend in Nepal’s interest rate environment. With banks holding adequate liquidity and credit growth remaining below expectations, pressure on deposit mobilization has eased significantly compared to previous years.

Lower deposit rates generally reduce returns for savers, particularly retirees and households dependent on interest income. However, they can also help banks lower their cost of funds, potentially paving the way for cheaper lending rates for businesses and consumers.

Economists note that the current interest rate environment reflects a banking sector flush with liquidity, supported by higher remittance inflows, moderate credit expansion, and stable deposit growth.

The latest reduction in fixed deposit rates comes as investors increasingly compare returns from traditional bank deposits with alternative investment avenues such as shares, mutual funds, bonds, and other financial instruments. As deposit yields continue to soften, competition for household savings is expected to intensify across Nepal’s financial sector.

Here is the complete translation and formatting of the chart from the image Bank_interest_rate_2083_Asar.jpg into English.

The image details the interest rates of commercial banks in Nepal for the months of Jestha and Asar in the year 2083 BS (Bikram Sambat), along with the difference between the two months.

Interest Rates of Commercial Banks (%)