New interest rates offered by Commercial Banks after backlash from Governor; interest rates fluctuate like share prices in past weeks

~Rishab Agrawal

Following the meeting of the Governor with the CEOs of all the commercial banks, the banks have entered into a new gentleman’s agreement to put a cap on the interest rate offered on deposit products.

After the end of the initial gentleman’s agreement, almost all commercial banks increased the interest rate offered on deposit products. The agreement was to fix limit on fixed deposit at 10.50% p.a. for individual and 10% p.a. for institutions and savings rate at 7% p.a. However, this agreement was not honored by the banks for a long time and after officially ending the agreement, interest rates on fixed deposit for individual hiked to 13% p.a. and savings rates increased to 7% p.a.

Looking at the situation, the Governor called a meeting yesterday that was to be compulsorily attended by the CEOs of all commercial banks. In the meeting, the Governor and the Deputy Governor expressed their disappointment on the issue of commercial banks raising interest rates on deposit products and asked the banks to enter into a new gentleman’s agreement. As per the new agreement, interest rate on fixed deposit for individuals was set at maximum of 9.25% p.a. while that for institutions was set at 8.50% p.a. Similarly, interest rate on savings was set at maximum of 6.50% p.a.

Following the developments of the meeting, almost all commercial banks (except for 8 banks) have revised their interest rates on deposit products and have published new interest rates effective from 6^th Poush 2075 i.e. today.

The following is the current interest rates offered by commercial banks on savings deposit and fixed deposit with minimum maturity period of 1 year:

The yellow colored cells are the banks that haven’t published notice regarding new interest rate. Rest of the banks have decreased the offered interest rate on deposit products as per the terms of the agreement.

Even though the banks have entered into the agreement on request of the Governor, they have a history of breaking the terms of the agreement by raising the interest rate above the stipulated rate. The question that remains is for how long will this agreement be honored by the commercial banks?