Increased liquidity in the market has forced commercial banks to reduce interest rates on deposits and loans.
The banks have reduced interest offered to institutional depositors by maximum. Institutional depositors who had been enjoying a 10% interest have seen the rates fall to around 7%.
While interest rates on other types of deposits have also dropped by 1 to 2%, the banks are reducing interest on loans by only 0.5 to 1%.
The banks have already reduced interest on periodic and short term loans. The interest rates on housing, vehicles and long term loans have dropped only slightly.
The banks are waiting for the new monetary policy issued by Nepal Rastra Bank to come in the form of directive before taking further decisions on interest rates on loans.
Several factors have contributed to the rise in liquidity in the market.
NRB has ordered commercial banks to put a cap on institutional deposits at 60%, reducing greatly the interest amount that went to the sector. Likewise, NRB directed the banks to reduce CRR and SLR ratio, thereby, freeing more of their funds for lending purpose.
A sudden spurt in government spending has also been cited as one of the reasons for the growth of liquidity in the market.
Src sharesansar
The banks have reduced interest offered to institutional depositors by maximum. Institutional depositors who had been enjoying a 10% interest have seen the rates fall to around 7%.
While interest rates on other types of deposits have also dropped by 1 to 2%, the banks are reducing interest on loans by only 0.5 to 1%.
The banks have already reduced interest on periodic and short term loans. The interest rates on housing, vehicles and long term loans have dropped only slightly.
The banks are waiting for the new monetary policy issued by Nepal Rastra Bank to come in the form of directive before taking further decisions on interest rates on loans.
Several factors have contributed to the rise in liquidity in the market.
NRB has ordered commercial banks to put a cap on institutional deposits at 60%, reducing greatly the interest amount that went to the sector. Likewise, NRB directed the banks to reduce CRR and SLR ratio, thereby, freeing more of their funds for lending purpose.
A sudden spurt in government spending has also been cited as one of the reasons for the growth of liquidity in the market.
Src sharesansar
