Most of the commercial banks have further reduced deposit rates for mid-July to mid-August (Shrawan), which begins on Tuesday.Out of 20 Class ‘A’ banks in the country, 13 have reduced their interest rates on individual fixed deposits. Likewise, two have raised their rates compared to mid-June to mid-July (Ashadh), while five have kept their rates unchanged.
With this revision, the average interest rate on individual fixed deposits has fallen from 6.91 percent in Ashadh to 6.73 percent in Shrawan. Banks offer slightly higher interest rates on long-term fixed deposits, while rates are lower on short-term fixed deposits. The downward revision in deposit interest rates will bring down the base rate and consequently make loans cheaper.
Nepal Rastra Bank (NRB), the central monetary authority, requires commercial banks to maintain a maximum difference of five percent between the upper limit of individual fixed deposit rates and the minimum savings rate. Interest rates offered on institutional fixed deposits are one percentage point lower than those offered on personal fixed deposits.
Banks are sitting on a huge stockpile of loanable funds as demand for credit is not picking up due to the slowdown in economic activities. NRB absorbed a total liquidity of Rs 2,705.6bn—Rs 1,060.3bn through deposit collection auctions and Rs 1,645.3bn through the standing deposit facility (SDF)—to mop up excess liquidity in the financial system in the first 10 months of the fiscal year 2023/24.
Total deposits in banks and financial institutions have gone up by 8.5 percent to Rs 489.7bn over the first 11 months of 2023/24. Credit, on the other hand, has seen a slower growth of 5.2 percent to 255.12bn, according to the Current Macroeconomic Situation Report for the first 11 months of 2023/24 published by the central bank last week.
Agricultural Development Bank Ltd and Everest Bank Ltd have increased their interest rates, while Nepal SBI Bank, Laxmi Sunrise Bank Ltd, Nabil Bank Ltd, Nepal Investment Mega Bank Ltd, and Standard Chartered Bank Ltd have kept their rates unchanged.
Out of 20 commercial banks, NIC Asia and NMB Bank Ltd are offering the highest interest rate of 7.53 percent, while Rastriya Banijya Bank Ltd has announced the lowest interest rate of 6.21 percent.
