Banks have also agreed to reduce the interest rate of call deposits by 0.21 percentage points which currently stands at 3.21 percent. Now, they have agreed to fix a 3 percent interest rate on call deposits.
However, bankers have kept the interest rate on fixed deposits unchanged for the time being. The bankers did not change the interest rate on fixed deposits fearing that such a move could infuriate the depositors and lead to the withdrawal of deposits. "In that situation, there would again be pressure on the liquidity situation. Keeping that in mind, the interest rate on fixed deposits has been kept unchanged," said Sharma. The banks had reduced the interest rate on fixed deposits to 11 percent in Falgun (mid-February to mid-March) from 12.13 percent. Bankers have also decided to reduce the loan premium rate by 1 percentage point. At present, banks have been determining the interest rate of loans with a premium of up to 6 percentage points on the base rate. Now, banks have agreed to determine the interest rate by adding a maximum of 5 percentage points to the base rate from mid-March. Banks were increasingly criticized for charging high premiums on loans as some of the banks' premiums were as high as 8 percent. With banks deciding to reduce the interest rate on savings, the interest rate on loans will also decrease in the coming days. The share of savings and call deposits in the total deposits of banks is about one-third. As the interest rate on deposits declines, it will bring down the banks' expenses to some extent. According to Anil Sharma, executive director of NBA, the meeting decided to reduce the interest rate to provide relief to the borrowers. "Lately, the borrowers are finding it difficult to pay the installments. Hence, we have decided to cut the interest rate on savings and call deposits which will lead to a reduction in the interest rate of loans," said Sharma. Amid the increasing discontent of the private sector over interest rates, and the rage of businesspersons spreading across the country in recent months, banks were under pressure to reduce the interest rates. With higher interest rates on lending making loans costlier on one hand and drying up the demand for loans on other hand, bankers have reached a conclusion to make loans cheaper. The private sector organizations have been complaining that many small and medium enterprises have been pushed to the wall by increased interest rates just as they were emerging from the pandemic. Last November, members of the business community took to the streets against the high-interest rates charged by banks and financial institutions. The interest rate cut was the top agenda of the private sector when they met Prime Minister Pushpa Kamal Dahal last week and Nepali Congress leader Shekhar Koirala on Tuesday. As the loan interest has become expensive, some businesspersons led by controversial businessman Durga Prasain have initiated a campaign of not repaying the loans. On the other hand, there is also pressure on the government and the Nepal Rastra Bank (NRB) to revitalize the market and the economy by reducing interest rates.
