Banking Khabar/Commercial banks have continued to lower interest rates on individual fixed deposits in the month of Falgun as well. The persistent rise in deposits and weak credit demand have prompted banks to reduce fixed deposit rates.
The average maximum interest rate on individual fixed deposits among 20 commercial banks has dropped to 4.57 percent, down by 0.11 percentage points from 4.68 percent in Magh. Out of the 20 banks, nine have reduced their rates, while the rest have kept them unchanged.
After the cap on institutional fixed deposit rates was removed, banks found room to lower the maximum rates on individual deposits. Additionally, policy rate cuts by Nepal Rastra Bank have further encouraged banks to bring down interest rates.
Banks are currently holding liquidity of over Rs 12.5 trillion, but weak credit demand from the private sector has forced them to cut costs and reduce fixed deposit rates, bankers say. In the first six months of the current fiscal year, private sector credit expansion has remained below 4 percent.
Only five banks are offering 5 percent or above on individual fixed deposits. Most banks are providing relatively higher rates only on long-term deposits. The average maximum rate has now declined to 4.57 percent, while interest rates on deposits with maturities of six months to one year are below 4 percent.
Governor Dr. Bishwo Nath Poudel, through the monetary policy for the current fiscal year, reduced key policy rates. In particular, the deposit collection rate—the lower bound of the interest rate corridor—was cut by 0.25 percentage points to 2.75 percent, further incentivizing banks to lower deposit rates. Other policy rates and the bank rate were also reduced.
Among the 20 operating commercial banks, only Nepal Bank Limited is offering a maximum individual fixed deposit rate of 5.1 percent. Himalayan Bank, Rastriya Banijya Bank, NIC Asia Bank and NMB Bank have proposed a maximum rate of 5 percent for Falgun, unchanged from Magh.
Global IME Bank has reduced its maximum rate from 5.50 percent to 4.75 percent for Falgun. Prabhu Bank, Nabil Bank and Machhapuchchhre Bank have maintained their maximum rate at 4.55 percent. Sanima Bank has lowered its rate from 4.55 percent to 4.50 percent, while Nepal Investment Mega Bank has cut its rate from 5 percent in Magh to 4.5 percent in Falgun.
Laxmi Sunrise Bank and Citizens Bank International have kept their rates unchanged at 4.5 percent, while Kumari Bank has maintained 4.43 percent. Siddhartha Bank reduced its rate from 4.55 percent to 4.25 percent, and Everest Bank lowered its rate from 4.4 percent to 4.25 percent.
Similarly, Nepal SBI Bank, Prime Commercial Bank, Standard Chartered Bank Nepal and Agricultural Development Bank have published a maximum individual fixed deposit rate of 4.25 percent for Falgun.
Rising liquidity, weak credit demand and changes in policy rates have collectively created conditions for continued reductions in fixed deposit interest rates across commercial banks.
