KATHMANDU, Aug 29: Commercial banks of Nepal have lowered their interest rate on fixed deposits to as low as 6.54 percent per annum after having excessive loanable funds amid slow demand for credits.

As economic activities and demands for loans have not increased, banks have been reducing interest rates on deposits since last year. The interest rate has been down by an average of 3.99 percentage points in the past one year. In August 2023, the banks’ average interest rate on fixed deposits stood at 10.53 percent per annum.  

The records with Nepal Rastra Bank (NRB) show that the bank and financial institutions (BFIs) collected deposits worth Rs 6.450 trillion as of Sunday. On the other hand they issued loans of Rs 5.184 trillion. The credit-deposit ratio has come down to 78.96 percent against the regulatory threshold of 90 percent.  

The BFIs now have loanable funds of around Rs 350 billion by excluding all the regulatory caps imposed by the central bank. According to a banker, the BFIs were unable to issue more loans in the past few months mainly as they struggled to maintain the mandatory capital adequacy ratio.

The central bank has asked the BFIs to maintain a minimum of 11.5 percent of their risk weighted assets in the capital adequacy fund. The banks are likely to extend their loan amount as they have improved in their capital adequacy ratio in recent days. 

According to the latest report, Standard Chartered Bank has the highest capital adequacy ratio at 17.16 percent. NIC Asia Bank stood at the lowest with its capital adequacy ratio of 11.18 percent.

Commercial banks increased their loans against shares by 19.88 percent in FY 2023/24

The commercial banks increased their lending against shares as collateral by 19.88 in the last fiscal year.

According to the records of Nepal Rastra Bank (NRB), commercial banks provided loans worth Rs 58.67 billion by the end of FY 2022/23. It increased to Rs 70.34 billion as of mid-July 2024.  Out of 20 commercial banks, 14 increased their lending, while six reduced their loan portfolio in the segment. 

 
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