The Interest Rates Just Keep Sliding Down; What This Means for NEPSE

Wed, Jan 13, 2021 4:41 PM on Interest Rates, Latest,

-ShareSansar

The national economy is slowly nursing its wounds after the nationwide pandemic and lockdown that followed. Businesses shut down and economic trade was brought to a halt.

As a result, banks and financial institutions saw little to no borrowing from borrowers. Furthermore, since there were no investment opportunities, they simultaneously saw a surge in deposits.

What can a bank do if it only has piles of money and no outflow? Reduce interest rates of course. Otherwise, its expense on interest payment will eat up profitability. This is why interest rates fell to record low levels during the pandemic.

The economy may have slowly revived and human movement may have resumed, but the interest rates are still falling.

Commercial Banks

Commercial banks are safer than other class institutions to save money. However, it comes at a cost. Commercial banks give the lowest interest rates among financial institutions, followed by development banks. Finally, microfinance institutions give the highest interest rates but they make riskier investments of the savings.

Comparison aside, commercial banks have updated their interest rate profile for the month of Magh. The base rates are still decreasing, and depositors get even lesser interest payments on savings and fixed deposits.

Here's a quick comparison.

Commercial Bank	Previous Interest Rate on Savings	Interest on Savings Now
Nabil Bank	1.5 to 3.5	1.5 to 3.5
NIC Asia Bank	1.5 to 3.5	1.5 to 3.5
Mega Bank	2.5 to 4.5	2 to 4
Nepal Bank	2 to 4	2.5 to 4
Nepal Investment Bank	2.25 to 4.25	2 to 4
NMB Bank	3 to 5	3.1 to 5.1
Global IME Bank	2.5 to 4.5	2 to 4
ADBL	3 to 5	3.5 to 5
Sanima Bank	2.5 to 4.5	2 to 4
Rastriya Banijya Bank	2 to 4	2.5 to 4
NCCB	3 to 5	3 to 5
Nepal Bangladesh Bank	3 to 4.25	2.75 to 4
Machhapuchchhre Bank Limited	2.5 to 4.5	2 to 4
Prabhu Bank	2.5 to 4.5	2 to 4
Himalayan Bank		2 to 4
Sunrise Bank	2 to 3.5	2 to 3.5
Everest Bank	2 to 4	2 to 4
Standard Chartered Bank	2.5 to 4.5	2 to 4
Laxmi Bank	2 to 4	2 to 4

Commercial Bank	Previous Interest Rate on Fixed Deposits (Individuals)	Interest Rates Now
Nabil Bank	5 to 6.5	5 to 6.5
NIC Asia Bank	6.5	6.5
Mega Bank	6.5 to 7.5	6 to 7
Nepal Bank	5.5 to 7	5.5 to 7
Nepal Investment Bank	5 to 7.25	4.75 to 7
NMB Bank	5.75 to 8	5.75 to 8
Global IME Bank	6.5 to 8.5	6.5 to 7
ADBL	6.25 to 7.25	6.25 to 7.25
Sanima Bank	6.5 to 7.25	5.5 to 6.5
Rastriya Banijya Bank	5.5 to 7	5.5 to 7
NCCB	7.25 to 9	6.25 to 8
Nepal Bangladesh Bank	6.25 to 8	6 to 7.75
Machhapuchchhre Bank Limited	7.5	7
Prabhu Bank	5 to 7.5	5 to 7.5
Himalayan Bank		4 to 7
Sunrise Bank	7	7
Everest Bank	5 to 7	4.5 to 6.5
Standard Chartered Bank	4.5 to 5.5	4.5 to 5.5
Laxmi Bank	6.5 to 8.5	6 to 7

Commercial Bank	Previous Interest Rate on Fixed Deposits (Institutions)	Interest Rates Now
Nabil Bank	4 to 8	4 to 6.5
NIC Asia Bank	6.5	6.5
Mega Bank	6 to 7	5 to 6.5
Nepal Bank	5.5 to 7	5.5 to 7
Nepal Investment Bank	5.5 to 6	5.5 to 6
NMB Bank	6.25 to 8	6.25 to 8
Global IME Bank	6 to 7	6 to 6.5
ADBL	6.25 to 6.6	5.75 to 6.1
Sanima Bank	6.6	6.75
Rastriya Banijya Bank	5 to 6.5	5 to 6.5
NCCB	7 to 8	6 to 7
Nepal Bangladesh Bank	6 to 7	6 to 7
Machhapuchchhre Bank Limited	5 to 7.5	7
Prabhu Bank	4.5 to 7	4.5 to 6.5
Himalayan Bank	6.5 to 7.5	3 to 7
Sunrise Bank	6.5 to 9	6.5 to 7
Everest Bank	5.5 to 6.5	5 to 6.5
Standard Chartered Bank	3 to 6	3 to 5.5
Laxmi Bank	6.5 to 7.5	6 to 7

Development Banks

Things are similar with development banks. Their base rates have either fallen or remained constant. The interest payment on savings will be even lesser in the month of Magh. Similarly, depositors depositing their funds on fixed deposits aren't spared either.

Development Bank	Previous Rates on Savings	Interest Rates on Savings Now
Kamana Sewa Bikas Bank	3.5 - 5.5	3.5 - 5
Excel Development Bank	2 to 4	3 to 4
Lumbini Bikas Bank	3.75 to 5.5	2.75 - 4.5
Garima Bikas Bank	3.5 to 5	3.5 to 5
Mahalaxmi Bikas Bank	3 to 4.5	3.75 to 4.25
Shangrila Dev. Bank	3.5 to 5.5	3.5 to 5.5
Jyoti Bikas Bank	3.5 to 5.5	3 to 5
Muktinath Bikas Bank	3.5 to 5.5	3 to 5

Development Bank	Previous Interest Rate on Fixed Deposits (Individuals)	Interest Rates Now
Kamana Sewa Bikas Bank	7 to 9	7 to 8
Excel Development Bank	7.5 to 9	7 to 8
Lumbini Bikas Bank	7 to 9.5	6 to 7.75
Garima Bikas Bank	7 to 8.5	7 to 8.5
Mahalaxmi Bikas Bank	6.5 to 8.5	6 to 8
Shangrila Dev. Bank	6.5 to 7.5	7 to 8
Jyoti Bikas Bank	6.5 to 8.5	6 to 8
Muktinath Bikas Bank	7 to 8.5	6.75 to 8

Development Bank	Previous Interest Rate on Fixed Deposits (Institutions)	Interest Rates Now
Kamana Sewa Bikas Bank	6.5 - 8	6.5 to 7.7
Excel Development Bank	6.25 to 6.75	6.25 to 7.5
Lumbini Bikas Bank	6.75	6.75
Garima Bikas Bank	7 to 8.5	7 to 8.5
Mahalaxmi Bikas Bank	5.5 to 7.25	5 to 6.75
Shangrila Dev. Bank	5.5 to 6.5	7 to 8
Jyoti Bikas Bank	6.5 to 7.5	6 to 7
Muktinath Bikas Bank	7 to 8.25	6.5 to 8

Base Rates

The base rates are also declining, both for commercial and development banks. Since the interest rates on loan products are tied to the base rates, this means that such rates have gone down too.

Commercial Bank	Previous Base Rate	Base Rate Now
Nabil Bank	6.37	6.12
NIC Asia Bank	6.5	6.65
Mega Bank	7.8	7.59
Nepal Bank	6.81	6.81
Global IME Bank	7.25	7.25
ADBL	8.53	8.48
Sanima Bank	7.43	6.9
Rastriya Banijya Bank	5.74	5.74
NCCB	8.63	8.63
Prabhu Bank	7.39	7.39
Sunrise Bank	7.51	7.24
Everest Bank	6.73	6.5
Laxmi Bank	8.09	7.74

Development Bank	Previous Base Rate	Base Rate now
Kamana Sewa Bikas Bank	9.4	9.68
Excel Development Bank	7.44	7.25
Lumbini Bikas Bank	-	9.65
Garima Bikas Bank	9.12	9.12
Mahalaxmi Bikas Bank	8.77	8.67
Shangrila Dev. Bank	8.87	8.87
Jyoti Bikas Bank	9.86	9.86
Muktinath Bikas Bank	9.06	8.71

What This Means

NEPSE's aggressive rise is partially attributed to falling interest rates. As returns on deposits are squeezed, more and more people will be inclined to find alternative investment vehicles. The stock market is the most convenient alternative for such funds. As a result, more money flows to the stock market. As there is more money flow (which can even be quantified by the money flow index), the upward movement of stock prices is exaggerated even more.

Does this mean that the bullish sentiment on NEPSE is meant to last longer than anticipated? When will the falling interest rates ever show signs of reversing? Like we all things finance, only time will tell.