Bankers’ association hikes interest rates on deposits

• Private sector urges NRB to postpone decision to increase interest rates on deposits

KATHMANDU: Nepal Bankers’ Association (NBA), an umbrella organisation of commercial banks, has increased the interest rates on deposits with effect from February 13. The Nepal Rastra Bank (NRB) is said to have asked the banks to increase interest rates to attract more deposits. NBA on Friday decided to raise the interest rate on deposits maintaining the upper limit of 11.03% per annum on fixed deposits for individual clients and 10.03% for institutional depositors. Likewise, the interest rate on savings accounts has been fixed at 5% less than the interest rate of fixed deposits while the interest rate on call deposit is maintained at 3.015% per annum. [gallery columns="1" link="file" size="full" ids="17584"] Meanwhile, on Friday, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) urged the Nepal Rastra Bank (NRB) to postpone the decision to increase the interest rate on deposits as it is likely to increase the base rate and also the interest rate on the loan. All kinds of industries in the country are going through a difficult situation at the moment, due to Covid 19 pandemic. The industry and business have not been able to operate well and the money from the sale and distribution of manufactured goods has yet to be collected from the market, the press statement issued by the FNCCI read. In such a situation, the private sector is sceptical of the increase in interest rate on loans taken by the industrialists and expressed that the sector would collapse if the practice of increasing interest rates on deposits every quarter is maintained. "We are of the view that the country will not even be able to project business costs while maintaining interest rate volatility. Looking at past experience, we strongly believe that raising interest rates will not solve the liquidity problem. When the industry and business sector is under all-around pressure due to the rise in interest rates, it has a direct impact on the country's production and economy," the statement read. Moreover, the FNCCI drew the attention of the government and the central bank to the fact that the recent decision to increase interest rates on deposits has led to an increase in interest rates on loans, which would further weaken the industry and business and thereby stall domestic production. The FNCCI said it is always ready to engage in talks and cooperation with the government, NRB and the banking sector to create an environment conducive to the smooth running of the industries and businesses. READ ALSO:

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