Even in Bhadra, when liquidity is still a challenge, banks has decided not to raise deposit interest rates, shortening the institutional fixed deposit rates while acknowledging the difficulty of accessing liquidity.
Since Falgun 2078, the banks have not raised the interest rates on fixed deposits. Banks have been paying an interest rate of 11.03 percent on fixed deposits.
The interest rate on regular term deposits has been held steady at 11.03 percent by banks. Previously, the interest rate for institutional depositors was 10.03 percent, which was one percentage point lower than the interest rate for regular depositors.
Nepal Rastra Bank (NRB) had pushed the banks to raise interest rates by raising the policy rates through the monetary policy of the current fiscal year, but despite the banking system's lack of liquidity, the banks has decided not to do so.
The banks are opposed to raising the interest rate on deposits because they cannot instantly raise the interest rate on loans, also because doing so would result in higher costs.
Institutional fixed deposit interest rates will decline as long as banks don't raise their interest rates. The interest rate on institutional fixed deposits must be 2% less than the interest rate on individual fixed deposits, according to the Central Bank.
As a result, institutional term deposits will now have an interest rate of 9.03 percent. However, 0.5 additional percentage points can be provided in Bolakbol (Auction). Institutional depositors from auction will now get interest at a 9.53 percent rate and the banks has to maintain a remittance rate of 12.03 percent.
When banks raised the interest rate on deposits last year, their expenses went up. As a result, all banks' base rates have increased. Some banks have base rates that are higher than 10%. In short, the interest rate on loans rises in tandem with the base rate, hence banks have decided not to raise the interest rates.