In a clear indication of liquidity surplus in the banking system, most commercial banks have reduced interest rates on deposits for the month of Kartik, which begins on Wednesday.
As banks are flush with loanable funds, interbank lending rates have fallen below two percent. Taking advantage of these low rates and to absorb liquidity in the banking system, the government has increased domestic borrowing. It has already raised the debt it had targeted to raise in the second quarter.
The government has set a target of raising Rs 240bn internal domestic debt in the current fiscal year. Out of this amount, the central bank has already secured Rs 87.31bn. This includes Rs 35bn that the central bank had initially planned to raise in the second quarter, according to the Monetary Management Department of the NRB.
Out of the 20 commercial banks in operation, 13 have reduced interest rates on individual fixed deposits, while four have maintained the same interest rates as the previous month. Meanwhile, three have increased their interest rates.
Nepal SBI Bank, NMB Bank, and NIC Asia have raised interest rates on deposits due to pressure on their credit-deposit ratios.
Himalayan Bank, NIC Asia Bank, and NMB Bank will offer the highest interest rate of 11.003 percent on individual fixed deposits. In Ashwin, from mid-September to mid-October, Himalayan offered an interest rate of 11.054 percent, while NIC Asia and NMB Bank offered 10.896 percent and 9.99 percent, respectively.
On the other hand, Standard Chartered Bank will offer the lowest interest rate at 9.22 percent on individual fixed deposits. Likewise, Everest Bank, Prabhu Bank, Sanima Bank, and Nepal Bank Ltd will offer an interest rate of 9.224 percent, while Rastriya Banijya Bank Ltd will offer 9.5 percent, Agricultural Development Bank will offer 9.76 percent, and Citizens Bank Ltd will offer 9.95 percent interest on individual fixed deposits.
Similarly, Siddhartha Bank Ltd and Machhapuchchhre are maintaining the same interest rates as last month, which is 9.99 percent.
Nepal Rastra Bank (NRB) allows banks and financial institutions to adjust their interest rates by a maximum of 10 percent each month.
Similarly, interest rate on institutional fixed deposits should be two percentage points lower than interest rate on individual fixed deposits.
