Kathmandu, July 17: For the Nepali month of Shrawan (mid-July to mid-August), Nepali commercial banks have further reduced their interest rates for individual and institutional deposits. According to the newly published rate sheets, all 20 commercial banks have lowered their interest on savings, while 15 banks have also cut rates on fixed (term) deposits. However, four banks have kept fixed deposit rates unchanged, and one has even increased them.
As per the updated rates, the average interest rate for one-year individual fixed deposits now ranges from a maximum of 5.698% to a minimum of 3.604%. In Ashadh (the previous month), the average maximum was 5.94%, and the minimum was 3.891%.
For regular savings deposits, the average interest rate now ranges between 3.905% (maximum) and 2.771% (minimum), compared to 4.353% and 3.011% respectively in the previous month.
With the fall in deposit interest rates, the base rate—used by banks to calculate lending rates—has also declined, resulting in a drop in loan interest rates.
In some cases, the minimum fixed deposit rate is now even lower than the maximum rate for regular savings deposits. This has prompted some depositors to prefer parking their funds in savings accounts instead of fixed deposits.
The primary reason for this coordinated rate cut is the reduction in the lower bound of the interest rate corridor by the Nepal Rastra Bank (NRB) through its recent monetary policy. The central bank has tied this lower bound to the interest paid by banks on collected deposits and mandated that deposit interest rates cannot fall below this threshold. The lower limit, previously set at 3%, has now been reduced to 2.75%.
Although the new monetary policy provisions haven’t been fully implemented yet, once enforced, deposit rates could fall further. The policy is designed to reduce interest rates, boost credit flows, and enhance banks’ lending capacity. Experts believe that due to the limited short-term scope for large-scale loan expansion, loan rates may drop even more in the coming weeks or months.
According to the bankers, banks have adjusted the savings deposit rate in line with the new lower corridor limit of 2.75%. However, most have not significantly cut fixed deposit rates. Due to excess liquidity — currently around Rs 10 Kharba — banks are not in a position to offer high interest rates.
By the end of mid-June (Jestha), the average base rate for commercial banks had dropped to 6.09%, while it was 8.29% for development banks and 9.02% for finance companies. A year ago, these rates were 8.17%, 9.96%, and 11.46%, respectively.
In the first 11 months of the fiscal year 2024/25, bank and financial institutions’ deposits increased by Rs 517.6 billion (8%), while private sector lending rose by Rs 407.6 billion (also 8%). In contrast, during the same period last year, deposits had grown by Rs 514.6 billion (9%) and lending by Rs 246.8 billion (5.1%). #nepal #rates #deposits
