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Interest Rate on Inter-Bank Transaction Rising

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Interest Rate on Inter-Bank Transaction Rising
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May 21: The short-term interest rate on inter-bank transactions has been increasing of late. The interest rate for inter-bank transaction which was 2.83 in average some five months ago has now soared to more than 5 percent at present.

Banks and financial institutions (BFIs) have been taking loans from each other at high rate due to lack of investible capital. Operators of different banks claim that they have not been able to lower the interest rate on inter-bank transactions due to the lack of investible capital in the last few years.

Sunil KC, CEO of NMB Bank, says that the rise in the interest rate on inter-bank transaction indicates that BFIs are active and the area of  investment is expanding.

The inter-bank transaction has increased significantly in the first nine months of the current fiscal year as compared to the last fiscal year. So far, the inter-bank transaction stands at Rs 11.65 billion in the current FY while it was 8.82 billion in the last fiscal year.

Meanwhile, the central bank has reduced the base rate but the businessmen complain that the BFIs have not reduced the rate of interest on loan. However, Nepal Rastra Bank (NRB) claims that there has been some reduction in the interest rate after it lowered the base rate.

There has been some improvement, says Dr Gunakar Bhatta, executive director of the research department of NRB.

 

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