January 31: The spread rate between average loans and deposits of 27 commercial banks stood at 3 percent in the second quarter of the current Fiscal Year (FY 2078/79).

The spread rate, which was 4.6 percent on average in the second quarter of FY 2077/78, has decreased by 1.6 points during this period.

Nepal Rastra Bank has asked the commercial banks to maintain the spread rate of 4.4 percent through the Unified Directive, 2078 BS. Spread rate is the difference between the interest rate charged by banks on loans and deposits. The spread rate shows the earnings of the banks. The higher the spread rate, the more banks earn.

The spread rate of Agriculture Development Bank has increased by 0.01 percentage points in the second quarter of the current fiscal year compared to the second quarter of last FY. The bank's spread rate was 4.37 percent in the second quarter of last year while it stood at 4.38 percent in the corresponding period this year.

Bankers have said that the fall in spread rate will have a direct impact on the bank's profit. According to Krishna Bahadur Adhikari, Chief Executive Officer of Nepal Bank, the spread rate has decreased in the second quarter of the current fiscal year due to the rise in interest rates on deposits. 

"Decreasing the spread rate has a direct impact on the bank's profits. Although the profit of the banks has increased as compared to the second quarter of last year, it has not increased as per the business expansion,” he said.

The official said that the interest rate on loans will increase in the coming days as the spread rate has declined in the second quarter of the current fiscal year due to stabilization of interest rates and an increase in interest rates of depositors.

Manoj Gyawali, general manager of Nabil Bank, said that the spread rate has been directly affected as the NRB has tightened the interest rate difference between savings and term deposits by issuing a circular after the banks indulged in unhealthy competition by raising interest rates. The rate of all savings also went up after the NRB issued a circular stating that the difference in interest rates between term deposits and savings should not be more than 5 percentage points. As a result, the base rate has increased and the spread rate has decreased, 'he said.

The spread rate of 11 commercial banks has been above average in the second quarter of the current fiscal year. Agriculture Development Bank, Rastriya Banijya Bank, NIC Asia Bank, Global IME Bank, Prime Commercial Bank, Nabil Bank, Kumari Bank, Prabhu Bank, Nepal SBI Bank, Citizens Bank, and Civil Bank are among the banks with spread rate above average in the second quarter of the current fiscal year. The spread rate of these banks is more than 3 percent. However, 16 banks have a below-average or 3 percent spread rate.