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The Nepal Stock Exchange (NEPSE) plunged by 27. 54 points to close at 1,855.06 points on Sunday. Similarly, the sensitive index dropped by 5. 22 points to close at 362. 82 points. A total of 3,778,951 unit shares of 250 companies were traded for Rs 1. 15 billion. Meanwhile, Eastern Hydropower Limited was the top gainer today with its price surging by 9. 99 percent. Likewise, Ru Ru Jalbidhyut Pariyojana Limited and Peoples Hydropower Company Limited were the top losers with their price dropping by 10. 00 percent. At the end of the day, the total market capitalization stood at Rs 2. 68 trillion.  

The price of gold has increased by Rs 600 per tola in the domestic market on Sunday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the precious yellow metal is being traded at Rs 100, 500 per tola today. It was traded at Rs 99, 900 on Friday. Meanwhile, tejabi gold is being traded at Rs 100, 000 per tola. Similarly, the price of silver has increased by Rs 10 and is being traded at Rs 1, 380 per tola today.

The Nepal Oil Corporation (NOC) has slashed the prices of petrol, diesel and kerosene by Rs 3 per litre. With this adjustment, petrol will cost Rs 178 per litre while diesel and Kerosene will cost Rs 175 per litre each respectively. According to the state-owned enterprise, it has made an adjustment based on the revised rates forwarded by the Indian Oil Corporation today. However, the prices of cooking gas, aviation fuel remained unchanged.

With the central bank giving a mid-March deadline for commercial banks to reduce their spread rate, the expectation of the private sector of banks' reducing their interest rates has been belied. The private sector has been putting immense pressure on the government and Nepal Rastra Bank (NRB) to reduce bank interest rates, the central bank and the commercial banks have remained indifferent to the demand of the business community indicating they will not revise interest rates any time soon. The NRB on Wednesday said that banks and financial institutions (BFIs) have to reduce their spread rate from mid-March 2023. Issuing a directive to implement the first quarterly review of monetary policy on Wednesday, the central bank has stated that commercial banks have to maintain a spread rate (the difference between the interest rate on deposits and loans) at 4.2 percent from mid-March and at 4 percent from mid-June. Currently, the spread rate of commercial banks stands at 4.4 percent. The NRB, while unveiling the first quarterly review of monetary policy on November 27, had reduced commercial banks' spread rate to 4 percent. As per NRB's latest directive, development banks and finance companies will have to reduce their spread rates to 4.8 percent from mid-March and 4.6 percent from mid-June. Speaking at a program on Wednesday, NRB Governor Maha Prasad Adhikari reiterated that the higher interest rates are the outcome of the current national and international economic scenarios hinting that the interest rates are unlikely to drop until next month. “The interest rate will automatically be revised if the situation improves,” Adhikari said. Recently, the Nepal Bankers’ Association (NBA) also expressed that the banks will not revise interest rates for the next month despite the easing of liquidity in the banking system. NBA statistics show that the average credit-deposit ratio (CD Ratio) of banks has come down to 86.41 percent, against the mandatory threshold of 90 percent enforced by the NRB allowing banks with additional capacity to provide Rs 198 billion in loans. According to NBA, commercial banks have collected deposits of Rs 95 billion in the past four and a half months while their extension of loans is Rs 58 billion. As a result, the interbank rate has also fallen to 6.86 percent from 8.5 percent. The private sector has been demanding to reduce interest rates soon after the banks hiked lending rates in mid-October. The average interest rate on fixed deposits stood over 12 percent, whereas the lending rate stands as high as 18 percent. Business community leaders say that the exorbitant interest rate amid soaring market prices has taken a heavy toll on the economic activities in the country. Shekhar Golchha, President of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said the apathy shown by the government and the NRB to resolve the current economic problems will lead the economy deeper into recession. A survey report recently conducted by the FNCCI also shows that the consumption of everyday essentials has fallen by 18 percent, the transaction of electrical appliances has been down by 55 percent, that of automobiles by 75 percent, restaurant business by 20 percent and real estate business by 48 percent. After their plea remains unheard, the business community has launched protests against NRB’s policy to tighten the money supply. The umbrella organizations including the NADA Automobiles Association of Nepal and Morang Merchant Association have scheduled protest programs. A high-ranking official at the NMB Bank said the banks are in wait-and-watch mode to revise interest rates. “At present, banks have some cushion of liquidity due to the decline in demand for loans. We are waiting for the next month to fully ascertain our liquidity position before we revise the interest rate,” said the banker on condition of anonymity. Bankers say they are closely watching factors that can again cause a big stress in liquidity in the banking system. According to them, the business refinancing facility provided by the NRB will mature by mid-January 2023, after which around Rs 65 billion is likely to be wiped out of the country’s banking system. Similarly, the extension of the arrangement to allow banks to consider up to 80 percent of the reserve funds of local governments in their deposits will expire by mid-January. Likewise, the taxpayers will have to settle their tax dues by the end of the second quarter. “These factors are likely to put a big pressure on the liquidity of banks,” the source said.