Banks reduce interest rate for Ashoj

NRB to mop Rs 50 billion today

KATHMANDU, Sept 16: Commercial banks have further reduced deposit interest rates for the month of Ashoj (mid-September to mid-October). The average interest rate on personal fixed deposits at 20 commercial banks has decreased by 0.15 percentage points in Ashoj compared to Bhadra (mid-August to mid-September).

In Bhadra, the maximum average interest rate on personal fixed deposits at these banks was 6.54 percent, which has fallen to 6.39 percent in Ashoj. Previously, in Shrawan (mid-July to mid-August), the maximum average interest rate on personal fixed deposits was 6.73 percent.

In Ashoj, two banks, Agriculture Development Bank and Nepal Bank, have increased the maximum interest rate on personal fixed deposits compared to Bhadra. Meanwhile, 10 banks have reduced their rates, and eight banks have kept them unchanged. The banks that have lowered the interest rates on personal fixed deposits are Rastriya Banijya Bank, Nepal SBI, Kumari, Prime, Sanima, Citizens, Nabil, NMB, NIC Asia, and Everest.

The banks that have kept their interest rates unchanged are Laxmi Sunrise, Global IME, Nepal Investment Mega, Siddhartha, Standard Chartered, Machhapuchhre, Prabhu, and Himalayan.

In Ashoj, NIC Asia Bank offers the highest interest rate on personal fixed deposits, providing up to 7.18 percent. Previously, in Bhadra, the maximum interest rate on personal fixed deposits was 7.41 percent, offered by NMB and NIC Asia banks.

In Ashoj, the lowest interest rate on personal fixed deposits is 5.9 percent offered by Sanima Bank. Banks appear to follow a policy of offering slightly higher interest rates for long-term fixed deposits and slightly lower rates for short-term deposits. As deposit interest rates decrease, the base rate also falls, which will provide relief to borrowers by reducing loan interest rates.

The Nepal Rastra Bank (NRB) has set a regulation that the difference between the maximum interest rate on personal fixed deposits and the minimum interest rate on savings accounts should not exceed five percentage points. Institutional fixed deposits must offer at least one percentage point lower interest rate compared to personal fixed deposits. Additionally, personal and remittance fixed deposits can offer up to one percentage point higher interest rate.

Although banks have sufficient investable funds, the cost for banks has increased due to their failure to proportionally increase loan disbursement. With ample liquidity available with the banks, the NRB has been mopping funds through bidding instruments for the past few weeks.

On Sunday, the NRB mopped Rs 100 billion rupees in liquidity and mopped Rs 50 billion on Monday. With sufficient liquidity available, the trend of decreasing deposit interest rates is evident, according to Sunil KC, president of the Nepal Bankers’ Association. Through the current fiscal year's monetary policy, the central bank has reduced the policy rate to 5 percent. The upper limit of the interest rate corridor is 6.5 percent.