Spread rate of commercial banks at 6.8%

KATHMANDU, May 12:

Average spread rate stood at 6.82 percent in the first nine months of the current fiscal year, according to recent statistics published by the Nepal Rastra Bank (NRB).

The central bank has asked commercial banks to cap spread rate at 5 percent from the new fiscal year. NRB introduced the provision in the Monetary Policy of 2013/14.

Commercial banks, however, have been gradually reducing spread rate. Spread rate was 6.85 percent in the sixth month (ending mid-Jan), 6.76 percent in the seventh month (ending mid-Feb), 6.73 percent in the eighth month (ending mid-March) and 6.62 percent in the ninth month (ending mid-April).

There are 30 commercial banks in the country.

Banks have been issuing loans at an average of 10.92 percent and collecting deposits at an average of 4.3 percent, according to the report on macro economic situation for the ninth month of the current fiscal year unveiled on Monday.

Commercial banks have long been complaining that spread rate cap at 5 percent is not practical and that it affects modern banking services being provided by them. “Bank will have to be more economic and cost effective to maintain spread rate at 5 percent,” Anil Gyawali, CEO of Nabil Bank, told Republica.

Not only the bankers, representatives of World Bank (WB) and International Monetary Fund (IMF) have also advised to the central bank to not adopt such cruel policy, arguing that such policy will impact sustainability of financial sector and expansion of modern banking facilities provided by private banks.

WB officials had also asked NRB not to enforce banks and financial institutions for directed lending, saying that it hurts their competence.

However, NRB officials have been repeatedly saying that they would enforce the provision from the beginning of 2014/15.

According to the report, deposit mobilization and credit flow increased by 11.4 percent and 10.9 percent, respectively, in the ninth month. Banks and financial institutions mobilized Rs 135.28 billion in deposits and issued Rs 125.4 billion in loans in the review period.

Similarly, consumer price inflation slightly moderated to 9.4 percent, compared to 9.5 percent in the same month of 2012/13. Inflation of the food and beverage group increased by 12.3 percent, whereas non food and services group inflation rose by 7 percent only.

Likewise, country´s Balance of payment (BoP) recorded surplus of Rs 106.23 billion in the first nine months of 2013/14 compared to a surplus of Rs 30.77 billion during the same period in the previous fiscal year. The country suffered trade deficit of Rs 454.06 billion in the review period, according to the report.

Source: Republica