October 12: A committee formed by the Finance Ministry in late September to study the spiraling interest rates of banks and financial institutions has suggested the government to keep its hands off the matters looked after by the central bank.

While submitting its report to Finance Minister Janardan Sharma, the ten-member committee headed by Joint Secretary Baburam Subedi, who is also the chief of the Economic Policy Analysis Division of the ministry, said that the interest rate is determined by the market and that the government should not intervene unnecessarily.

The study conducted by the committee concluded that Nepal Rastra Bank is responsible to fix the interest rates and government should not issue instructions in this matter because it would undermine the central bank’s autonomy.

The committee had one representative each from the Office of the Prime Minister and Council of Ministers, Nepal Rastra Bank, National Planning Commission and the Ministry of Industry, Supplies and Commerce the Federation of Nepalese Chamber of Commerce and Industry, the Confederation of Nepalese Industries and Nepal Chamber of Commerce while the banking sector was represented by two members of Nepal Bankers Association.

It may be noted that banks have increased the interest rates effective from September 17 almost five months after maintaining a stable interest rate. Such an initiative was taken upon the instruction of the central bank.