KATHMANDU, Feb 12: Banks are increasing the interest rate on deposits citing the tight liquidity position in the country’s banking system.

Nepal Bankers’ Association (NBA) through a meeting on Friday decided to raise the interest rate on deposits by one point percent. In the revised rate, the umbrella organization has maintained the ceiling of 11.03 percent on the fixed deposits for the individual clients.

The upper limit of the interest rate for the institutional depositors has been set at 10.03 percent per annum. Likewise, the interest rate on savings accounts has been fixed at five percent less than the interest rate of fixed deposits while the interest rate on call deposit is maintained at 3.015 percent per annum.

According to a banker, the banks look to increase the interest rate following a pressure from Nepal Rastra Bank (NRB) to do so. Amid deepening shortage of loanable funds despite NRB implementing various measures, the central bank is said to have asked the banks to increase interest rates to attract more deposits.

According to NRB records, the base interest rate on lending reached 8.42 percent as of mid-January. Similarly, the average interest rate on deposits hit 6.37 percent per annum.

Following a rise in interest rate on deposits, banks are likely to increase the lending rate soon. Recently, banks increased their base interest rate on loans by more than two point percent effective from mid January, citing an increase in their expenses for the interest on deposits.

 
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