BFIs don’t decrease interest on loan despite capital fluidity

ShareSansar, Sept 16:

As bank and financial institutions have not decreased the interest rate on loans despite excessive fluidity in the capital market, they are finding fewer borrowers and lesser areas of investment.

BFIs maintain that they cannot slash the interest rate as the cost of maintaining the deposit is high.

According to the Nepal Rastra Bank, the average base rate stands at 9.53 percent.

Chairperson of Nepal Bankers’ Association, Rajan Singh Bhandari opined that the rate of interest on lending is appropriate at this point.

“The base rate is on a par with the rate of inflation, and the interest on lending has been fixed by adding up to three percent on it,” he said. “This is very reasonable.”

He further said that the banks do not need to decrease the interest rates on both deposit and lending if they can manage the deposits on a short-term basis.