KATHMANDU, Feb 21: Commercial banks were able to increase their deposits by mere Rs 1 billion last week after they raised the interest rate on deposits to attract more funds.
The records with Nepal Bankers’ Association (NBA) show that the deposit collection with banks increased to Rs 4.312 trillion from Rs 4.311 trillion as of mid-February. During the review period, the banks’ lending grew by Rs 4 billion to reach Rs 4.159 trillion in total.
Revised interest rate corridor system introduced
Despite Nepal Rastra Bank’s announcement to check lending by the banks, it is not yielding an effective result. Due to the excess lending against slow deposit collection, the credit-deposit ratio has crossed the set limit of 90 percent.
Citing the liquidity crunch in the country’s banking system, NBA hiked the interest rate on deposits by one point percent last week. In the revised rate, the umbrella organization has maintained a ceiling of 11.03 percent on the fixed deposits for individual clients.
Increasing the interest rates is barely assisting in gathering funds for the banks, show NBA records. Rather, the banks seem to be increasing the interest rates on their loans, citing an increase in their cost of funds any time soon.
