Majority of banks cut deposit interest rates for Ashwin

A majority of commercial banks have reduced deposit interest rates for the month of Ashwin (mid-September to mid-October). The maximum average interest rate on personal fixed deposits across 20 commercial banks has dropped by 0.15 percentage points compared to Bhadra (mid-August to mid-September).

In Bhadra, the maximum average interest rate on personal fixed deposits was 6.54%, which has now decreased to 6.39% in Ashwin. Earlier, in Shrawan (mid-July to mid-August), the rate had been calculated at 6.73%.

In Ashwin, 10 banks have reduced their interest rates on personal fixed deposits. They are Rastriya Banijya Bank, Nepal SBI, Kumari, Prime, Sanima, Citizens, Nabil, NMB, NIC Asia, and Everest.  Similarly, 8 banks- Laxmi Sunrise, Global IME, Nepal Investment Mega, Siddhartha, Standard Chartered, Machhapuchchhre, Prabhu, and Himalayan-have kept their rates unchanged. 

Likewise, 2 banks—Agricultural Development Bank and Nepal Bank—have increased their deposit interest rates.

Among all banks, NIC Asia is offering the highest interest on personal fixed deposits in Ashwin at 7.18%, though this is lower than the 7.41% offered in Bhadra by NMB and NIC Asia. Sanima Bank offers the lowest rate at 5.9%. Banks generally offer higher rates on long-term fixed deposits and lower rates on short-term ones.

As deposit rates fall, base rates will also decrease, providing relief to borrowers as loan interest rates drop.

Nepal Rastra Bank (NRB) has mandated that the difference between the maximum rate for personal fixed deposits and the minimum rate for savings accounts should not exceed 5%. Additionally, institutional fixed deposits must offer at least 1 percentage point lower interest than personal fixed deposits, and remittance-linked personal deposits can offer 1 percentage point higher interest.

Banks currently have abundant investable funds, but loan demand has not increased accordingly, raising their costs. Due to this excess liquidity, the NRB has been moping up funds from the market through auctions. On Sunday, it mopped up NPR 100 billion, and on Monday, it plans to absorb another NPR 50 billion.

 The central bank’s monetary policy for the current fiscal year has reduced the policy rate to 5%, with the upper limit of the interest rate corridor set at 6.5%.