Deposit Interest Rate Likely to Drop in the Month of Chaitra

Kathmandu : Bankers have said that there is a possibility that the deposit interest rate may decrease even in Chaitra. They said that there is a possibility of further reduction in interest rates in Month of Chaitra as there is sufficient liquidity in the banks. Even now, the demand for loans has not increased, the burden of deposits on banks is still there, so there is a possibility that the interest rate on deposits will decrease somehow in the Month of Chaitra, said a CEO of a bank. Commercial banks fixed the maximum interest rate at 8.5 percent in month of Falgun.

Due to lack of credit, banks are investing in government bonds and the National Bank of India in various instruments to draw liquidity from the market. The CEO said that the cost burden is high because the bank is getting only around 3 percent interest rate by investing in such equipment.

Even though the monthly increase in remittances, lack of improvement in imports and loan demand in banks has decreased due to which the deposits have piled up. Even now, the banking system has around 600 billion Rupees of  loanable capital.

Now, due to the withdrawal of deposits from some institutions, such deposits have been added to other banks, said the CEO, “Since the loan has not gone, this time, the bank has benefited from the decrease in deposits.

” Now, the interest gap between institutional investors and individual term deposits has also been reduced, so the interest rate will decrease further. Central Bank had earlier amended the provision that the interest difference between individual term deposits and institutional deposits should be at least two percent”, said the CEO.

Although institutional deposits may decrease due to falling interest rates, recently such interest gap can be seen up to one percent. The National Bank has suggested to the banks that the deposit interest rate should not be reduced too much. The National Bank has suggested that deposits may be discouraged due to low interest rates.

Bankers have said that there is a possibility that the deposit interest rate will decrease even if it is small due to the high capital burden. As the financial year is coming to an end, as the expenditure from the government will increase somehow, it is estimated that the loan demand may improve even though it is normal. For this reason, banks are thinking of not reducing the deposit interest rate too much.