Cartelization Continues in Development Banks with Varied Interest Rates; Reduced Rates In Effect From Shrawan
The Development Banks have persisted with the practice of cartelization, following the lead of commercial banks even after their departure. Despite the Nepal Bankers' Association (NBA), representing commercial banks, discontinuing the long-standing cartelization and granting individual banks the authority to set deposit interest rates, the Development Bankers Association Nepal (DBAN) has adopted the same collusive approach to determine interest rates.
In response to widespread protests, the NBA took the decision to terminate cartelization during a meeting held on Thursday. However, the DBAN has continued to engage in cartelization even after its cessation.
On Friday, the DBAN convened a meeting of member bankers to discuss the deposit interest rate effective from Shrawan 1st. During the meeting, it was agreed to maintain the tradition of setting interest rates through consensus.
The association has established two distinct interest rates for national-level and regional-level banks. Presently, national-level development banks are offering a 10.6 percent interest rate, while regional-level banks are providing a 10.85 percent interest rate for a one-year period.
Starting from Shrawan 1, national-level development banks will decrease their interest rates by 0.50 percentage points, resulting in a 10.1 percent interest rate on deposits.
Regional-level banks will maintain an interest rate that is 0.25 percentage points higher than the national level, resulting in a published interest rate of 10.35 percent.
During the meeting, it was deemed inappropriate to maintain the same interest rates when there is over Rs. 4 Arba in liquidity. Therefore, a consensus was reached to decrease the interest rate. However, certain discussions, akin to those held by the Bankers' Association, remained inconclusive.
The decision to fix the interest rates through consensus was made to ensure that the interest rates offered by the Development Banks are not lower than those offered by commercial banks, particularly if some commercial banks increase or maintain their deposit interest rates. This was to safeguard against the possibility of the Development Banks losing their deposits to commercial banks.
The finance companies will announce its interest rates tomorrow, with a meeting scheduled for Saturday at 11 o'clock.
All banks and financial institutions are required to publish their interest rates for the month of Ashad by Sunday, as per regulatory provisions.
