Kathmandu, July 17: Most commercial banks have lowered deposit interest rates for the month of Shrawan, the first month of the new fiscal year, as excess liquidity and weak credit demand continue to weigh on Nepal’s banking sector.
According to Nepal Rastra Bank, excess liquidity in the banking system stood at Rs 1.415 trillion as of July 15. To absorb surplus cash, the central bank has already withdrawn Rs 1.320 trillion through various monetary tools, leaving banks with another Rs 95.5 billion in idle liquidity.
With lending demand remaining weak, banks are holding more cash than they can lend, pushing deposit rates even lower. While borrowers stand to benefit from cheaper loans, savers will earn lower returns.
Data from the Nepal Bankers’ Association shows that 17 of the country’s 20 commercial banks have cut savings deposit rates, while six have reduced interest on individual fixed deposits. No bank has increased deposit rates this month.
The average maximum interest rate on individual fixed deposits fell to 4.168 percent in Shrawan from 4.258 percent in Asar. The average minimum savings rate edged down to 2.751 percent.
Rastriya Banijya Bank made the biggest reduction, cutting its maximum fixed deposit rate by 0.75 percentage points to 4 percent from 4.75 percent. Global IME Bank also reduced its top fixed deposit rate to 4 percent from 4.5 percent, while NMB Bank lowered its rate to 4.5 percent from 4.75 percent.
Nabil Bank and Prabhu Bank now offer the highest fixed deposit rate at 4.55 percent. Machhapuchchhre Bank, Nepal Investment Mega Bank, NMB Bank and Sanima Bank offer up to 4.5 percent, while Nepal Bank and Agricultural Development Bank offer 4.25 percent and 4.15 percent, respectively.
Fourteen banks have kept their fixed deposit rates unchanged, including Everest Bank, Laxmi Sunrise Bank, Nabil Bank, Nepal SBI Bank and Sanima Bank.
Agricultural Development Bank reduced its maximum savings rate to 3.35 percent from 3.6 percent, while most other banks continue to offer savings rates around 2.75 percent.
Nepal Bankers’ Association Chairman and Machhapuchchhre Bank CEO Santosh Koirala said low interest rates could persist for another year as banks continue to grapple with surplus liquidity of nearly Rs 1.4 trillion.
He said the current environment presents an opportunity for borrowers, with banks’ base lending rates having fallen to around 5 percent, making loans cheaper than in recent years. Bankers expect lending activity to improve gradually from the second week of Shrawan as banks shift their focus from year-end loan recovery to fresh credit expansion. The banking sector has set an 11 percent credit growth target for the current fiscal year.
People’s news monitoring service
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