Bankers have
asked the central bank to become flexible on spread rate.
Writing a
letter to the central bank today, the Nepal Bankers’ Association (NBA) said
that they are unable to reduce the spread rate to five per cent, as prescribed
by the monetary authority.
After the borrowers
complained of 'unnatural' fluctuation on lending and deposit interest rates, the
central bank had directed the commercial banks to maintain a spread rate at five
per cent by the end of the current fiscal year 2013-14.
The banks
have to either reduce the lending rate or increase the deposit rate to maintain
the spread. However, with the bulging deposits and low borrowing in the recent
months, the banks have been finding it difficult to bring the lending rates
down or increasing the deposit rates.
The spread
rate of the commercial banks stands at 6.93 per cent as of mid-November,
according to the central bank data.
Likewise,
the interest rate of 91-day Treasure Bills – that went up to nine per cent in
2010 – also plunged down to 0.4255 per cent on December 18.
"Low
economic growth and high inflation has made it difficult for the banks to
expand the financial market," said the letter to the governor, and deputy
governors. "The operating expenses have increased by 16 per cent in last
fiscal year 2012-13."
The bankers have also
claimed that the fixed interest rate will have a long-term impact on the
banking sector. "The provision will affect the banks’ plans to expand
services to remote areas and will have negative impact on government-owned
banks which are already facing high operating expenses," the letter read,
adding that the banks will be discouraged to accept deposits, which will fuel capital
flight, also due to a fixed spread rate.
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