Gap between fixed, saving deposits narrows
KATHMANDU,JAN 7:
The gap between saving and fixed deposits in banks and financial institutions(BFIs) have contracted as the yield on saving deposits has grown as high as offered for fixed deposits.
The amount of savings deposits with the financial institutions have also grown rapidly during the first four months of the current fiscal year while the fixed deposits’ grown rate has remained steady.
By the fourth month of fiscal year 2010-11, fixed deposit comprise 38.7 per cent of the total deposits held by the financial institutions -commercial banks, development banks, finance companies and microfinance development banks which covered 38 per cent of the total deposits in mid-July. The fixed deposits amount to Rs 357.2 billion which stood at Rs 332.7 billion at the beginning of the fiscal year, according to the monthly banking statistics published by Nepal Rastra Bank (NRB).
Likewise, saving deposits that used to comprise 33 per cent of total deposit have grown over the four months and comprises 35 per cent of the deposits held by the financial institutions. The financial institutions had Rs 309.1 billion as saving deposits in the beginning of the fiscal year have grown to Rs 328.9 billion by mid-November.
“The gap between interest offered by saving deposits and fixed deposits have become smaller lately so that public are choosing savings over the fixed,” said Bhaskar Mani Gyanwali, spokesperson for the central bank.
Most of the finance companies and development banks are offering about 12 per cent interest on average for fixed deposits while fixed deposits at commercial banks offer 10 per cent yield on average. On the other hand, even commercial banks are offering interest as high as eight per cent on savings and class ‘C’ and ‘D’ are offering saving deposits with interest up to 10 per cent. “Thus, depositors prefer the fixed deposits in comparison to savings,” he added.
The fixed deposits offer higher interest rate compared to savings. The higher interest rates compensate for money getting tied-up with banks for the fixed tenure where unlike saving deposits that allows depositors to withdraw the funds at their preference. “The customers get higher interest but flexibility to withdraw the money at their will with savings so they prefer savings,” he pointed out.
According to the central bank’s official data published in its monthly macroeconomic report, the interest rate offered by commercial banks for saving deposits span between two to 12 per cent. The interest offered for fixed deposits fall within the range of 1.75 to 12 per cent.
Since last couple of year financial sector was going through liquidity crunch propelling the financial institutions to offer higher interest rate to depositors in order to attract more deposits. The pressure to attract more deposits depositors is getting higher interest rate.
However, lately the financial sector has become comfortable in terms of liquidity as the deposits have grown substantially to Rs 922.6 billion in mid-November from Rs 873.488 in the beginning of fiscal year. The interest rate– both deposits and lending– are expected to go down along with the bulging deposits.
Source: THT
