Low inter bank rate to pull interest rates down
KATHMANDU:
The current low inter bank rate could pull the interest rates down, according to the central bank.
“If the inter bank rate goes down in this same manner for next few months, the interest rate might also come down,” said spokesperson for the central bank Bhaskar Mani Gyanwali. The inter bank lending rate that was riding as high as 12 per cent few months ago has come to approach one per cent — almost lowest in a decade — in the recent times..
“This week’s average inter bank lending rate stood at 1.5 per cent,” he said.
The rising deposit in the commercial banks that has eased the liquidity situation of Nepali financial sector can be attributed to the declining inter bank rate.
The easing liquidity situation will not only revise the lending interest rate but also deposit interest rate. The tight liquidity situation had prompted the deposit interest rate to go as high as 10 per cent for saving deposits.
Consequently, lending interest rates have also skyrocketed to as high as 20 per cent making credit highly expensive commodity. “The deposits have continuously been surging since some time that the need for financial institutions to borrow from each other is not much,” pointed out Nepal Rastra Bank (NRB)’s spokesperson.
The inter bank lending rates are the interest rate charged by one financial institution to other for short term loans. The rate charged depends on the availability of money in the market, on prevailing interest rates and on the specific terms of the contract, such as term length. It is considered the best short-term liquidity management tool as the needy ones can borrow and the banks and financial institutions with surplus cash on hand can lend earning interest.
The inter bank rates are one of the guiding factors for the interest rates. Higher inter bank rate points out the acute need of cash for the banks and financial institutions and vice versa.
In the last fiscal year, banks undertook inter bank lending worth Rs 397.6 billion while in a fiscal year ago, it stood at Rs 268.85 billion among the banks and financial institutions to cover the shortfall in their liquidity, according to the Nepal Rastra Bank data.
Lately, the inter bank rate reached as high as 12 per cent as the banks and financial institutions grew distrustful of each other due to the instances of few financial institutions going bad-some even refused to lend. The central bank also intervened to nip the imminent crisis by providing option of taking collateral against lending among banks and financial institutions.
Source: THT
The current low inter bank rate could pull the interest rates down, according to the central bank.
“If the inter bank rate goes down in this same manner for next few months, the interest rate might also come down,” said spokesperson for the central bank Bhaskar Mani Gyanwali. The inter bank lending rate that was riding as high as 12 per cent few months ago has come to approach one per cent — almost lowest in a decade — in the recent times..
“This week’s average inter bank lending rate stood at 1.5 per cent,” he said.
The rising deposit in the commercial banks that has eased the liquidity situation of Nepali financial sector can be attributed to the declining inter bank rate.
The easing liquidity situation will not only revise the lending interest rate but also deposit interest rate. The tight liquidity situation had prompted the deposit interest rate to go as high as 10 per cent for saving deposits.
Consequently, lending interest rates have also skyrocketed to as high as 20 per cent making credit highly expensive commodity. “The deposits have continuously been surging since some time that the need for financial institutions to borrow from each other is not much,” pointed out Nepal Rastra Bank (NRB)’s spokesperson.
The inter bank lending rates are the interest rate charged by one financial institution to other for short term loans. The rate charged depends on the availability of money in the market, on prevailing interest rates and on the specific terms of the contract, such as term length. It is considered the best short-term liquidity management tool as the needy ones can borrow and the banks and financial institutions with surplus cash on hand can lend earning interest.
The inter bank rates are one of the guiding factors for the interest rates. Higher inter bank rate points out the acute need of cash for the banks and financial institutions and vice versa.
In the last fiscal year, banks undertook inter bank lending worth Rs 397.6 billion while in a fiscal year ago, it stood at Rs 268.85 billion among the banks and financial institutions to cover the shortfall in their liquidity, according to the Nepal Rastra Bank data.
Lately, the inter bank rate reached as high as 12 per cent as the banks and financial institutions grew distrustful of each other due to the instances of few financial institutions going bad-some even refused to lend. The central bank also intervened to nip the imminent crisis by providing option of taking collateral against lending among banks and financial institutions.
Source: THT
