The interest rate on loans charged by one bank from another bank has fallen close to the lower limit of the interest rate corridor set by the central bank.
According to Nepal Rastra Bank data, the interbank interest rate has come down to 4.92 percent as of Tuesday. As of Monday, the interest rate was 6.17 per cent. On Tuesday, the interbank interest rate dropped by about 1.5 percentage points in a single day.
The central bank has set an upper limit of 7.5 percent under the interest rate corridor and a lower limit of 4.5 percent deposit collection rate. The central bank aims to maintain interbank interest rates within this limit. When there is less liquidity in banks, such interest rates reach the upper limit, while when the liquidity is high, it falls to the lower limit.
Nepal Rastra Bank (NRB) had sent money to the bank accounts so that local level money could be counted as deposits. This has increased the amount of investment in banks. As a result, the interbank interest rate has come down.
Deposits of Rs 60 billion have been added to the banks after the local level money was counted as deposits.
At present, the total deposits of banks are Rs 4967 billion and the average CD ratio of banks is 83.69 percent. On this basis, banks have an investment of Rs 313 billion.
Finance Minister Prakash Sharan Mahat was also unhappy with the bankers after the banks increased the interest rate on deposits in August. Finance Minister Mahat has decided to allow 60 per cent of the local level money to be counted as deposits to encourage the reduction of interest rates after bankers raised interest rates. He has called bankers and held several discussions in August after banks raised interest rates. Mahat had put a condition that the interest rate should be reduced even when the money of the local level was allowed to be counted. Banks are also under pressure to reduce interest rates after local level money was counted as deposits.
Businesses are also pressing for a reduction in interest rates. Businessmen have also demanded that the interest rate should be reduced as the economy is not moving due to high interest rates. The interest rate on loans is set to rise again after bankers raised interest rates on deposits without the borrowers realising that the interest rate on loans has come down. As a result, businessmen have also put pressure to reduce interest rates.
Some are analysing that the economy has slowed down due to high interest rates of banks. In such a situation, bankers are under pressure to reduce interest rates to keep the economy moving.
There has been unhealthy competition among the banks after the bankers' association broke the polite agreement since Last July. After some banks increased deposit rates in July, the remaining banks also increased the deposit rates in August. This created a situation of loss of deposits in banks.
Despite having enough investible funds in banks, bankers are pushing for an increase in deposit rates, which will also increase lending rates. Bankers say that if the local level money is counted as a deposit, it will reduce the cost, but the increase in deposit interest rates in August will not have a big impact.
Bankers will again fix new interest rates for September on Sunday. Many bankers are not in Favour of raising interest rates in September. However, a banker says that the decision on whether to continue the current interest rate or reduce it by a few percent will be decided after internal discussions in the bank. Although some banks with high interest rates have reduced interest rates, some banks that have already reduced interest rates can keep interest rates stable in September, he said.
- How much interest rate was fixed in August?
In August, commercial banks had fixed interest rates ranging from 8.92 per cent to 10.90 per cent on fixed deposits. On an average, the interest rate on personal fixed deposits has been fixed at 10.33 percent
