Banks not decreasing interest rates

The commercial banks decided that they will not decrease interest rates for next one month due to the current ‘tight’ situation in the financial market and soaring inflation.

Nepal Bankers’ Association’s (NBA) meeting today decided not to raise the interest rates for the next month starting from November 17.

There has been a huge cry from the private sector as the banks hiked the interest rates to contain the but still the interest rate and the inflation doesnot match. The depositors are getting 7 per cent  on their deposits whereas the inflation is above 8.5 per cent. But the private sector is blaming the central bank for supporting the Banks and Financial Institutions (BFIs) ensuring them a huge profits by letting them increase the interest rates. The private sector has also come to street to protest against the interest rates hike, which they have postponed – for the time being – citing the elections to the House of Representatives and provincial assemblies scheduled for November20.

Since mid-September, the banks have increased their interest rates on fixed deposits by 10 percentage points to 12.13 per cent, while the interest rates on savings accounts is only 7.13 per cent per annum on an average. However, the lending rate has gone up to 18 per cent, blame the private sector that funnels the borrowing to imports. But when the bank rates were low also, the inflation was more than the bank deposit rates, hurting not only the savers but also the economy.

However, increasing interest rate failed to create new deposits. But the slowdown in the economy has pushed nonperforming loans (NPL) and the cases of bad debts are also increasing, which are serious concerns.