Short-term interest rates up

In the recent months, the short-term interest rates have been increasing.
However, some commercial banks are still providing interest rate oftwo per cent for such deposits. The interest rates on fixed deposits have also increased. The interest rate on fixed deposits of more than two years increased to 6.75 per cent in mid-April 2008 from 5.5 per cent in mid-July 2007. The minimum interest rates on such deposits increased to 2.75 per cent in mid-April 2008 from 2.5 per cent in mid-July 2007, states a Nepal Rastra bank (NRB) report.
Interest rates on lending have also changed marginally. Minimum interest rates on loans to the industrial sector declined to seven per cent in mid-April 2008 from eight per cent in mid-July 2007 along with a decline in its maximum interest rates by 50 basis points to 13 per cent in mid-April 2008.
Likewise, maximum interest rates on agriculture credit declined by 100 basis points to 12 per cent. Interest rates on commercial credit and overdraft declined by 50 basis points to 13.5 per cent in mid-April 2008.
Compared to the previous year, the weighted average monthly 91-day Treasury bill rate also stood at 4.07 per cent in mid-April 2008. Such a rate was 1.85 per cent in mid-April 2007.Similarly, the weighted average monthly inter bank rate remained at 2.69 per cent in mid-April 2008 in comparison to 1.69 per cent a year ago, states the report of first nine months.
Some changes in the interest rates of deposits and credit have also been witnessed lately. Maximum interest rate on saving deposits increased to 6.5 per cent in mid-April 2008 from five per cent in mid-July 2007.
In the first nine months of 2007-08, the liquid funds of commercial banks increased by 11.8 percent amounting to Rs 72.90 billion. Such funds had increased by 3.6 per cent amounting to Rs 65.20 billion in the same period of last year. Of the liquid funds, commercial banks' balance held abroad increased by four per cent to Rs 35.28 billion.Likewise, commercial banks' cash in hand stood at Rs 9.38 billion and balances with the NRB increased by 2.2 per cent to Rs 23.37 billion in the review period.
Including commercial banks' holding of government securities of Rs 64.79 billion, total liquid assets of commercial banks reached Rs 137.70 billion as in mid-April 2008, showing a growth of 13.3 per cent. Such liquid assets were Rs 121.50 billion as in mid-April 2007. Considering the public deposit of Rs 390 billion with the commercial banks, the liquid assets/deposits ratio of the commercial banks stood at 35.3 per cent in the review period.
A net liquidity of Rs 65.98 billion was injected through a net purchase of $1.03 million from commercial banks through foreign exchange intervention in the review period. A net liquidity of Rs 47.96 billion had been injected through the net purchase of $664.2 million from commercial banks in the previous year.
Indian Currency (IC) purchase has also been increasing. In the first ninth months of 2007-08, the NRB purchased 41.82 billion IC equivalent to Rs 66.9 billion by selling $1050 million. During the same period of the previous year, a total of Rs 40.97 billion equivalent IC was purchased through the sale of $570 million. A widening current account deficit with India along with a higher payment by Nepal Oil Corporation (NOC) to Indian Oil Corporation accounted for such an increase in purchase of IC in the review period. The sale of the US dollar to purchase IC remained higher than the purchase of the US dollar from commercial banks in the review period.
In the course of monetary management, the NRB absorbed a total liquidity of Rs 11.04 billion including Rs 6.57 billion through reverse repo and Rs 4.47 billion through outright sale auction in the review period. In the same period of the previous year, a total liquidity of Rs 22.96 billion was absorbed through outright sale auction of Rs 8.9 billion and reverse repo auction of Rs 14.06 billion.