February 16: The interest rates of banks cannot be lowered to a single digit immediately, insists Sunik KC, the president of Nepal Bankers Association.

In an interaction program organized by the Nepal Bankers Association on Wednesday, KC said that although the improvement in economic indicators has led to a gradual decrease in interest rates, the situation where interest rates can be maintained at a single digit is yet to be achieved.

He mentioned that although there are some signs of improvement in the economy in recent months, the banks are still under pressure.

KC admitted that the banks’ interest rates are high and there is a demand to reduce them to single digit. But it is not possible to reduce it immediately. He mentioned that the interest rates will go on decreasing gradually through policy adopted by the banks.

He said that the banks are aware that the interest on loans should be kept stable. But the interest rate is increasing all over the world and it has affected Nepal as well, said KC.

Stating that banks have collected deposits of Rs 200 billion in the last seven months of the current fisdal year, he said that the target is to collect deposits of Rs 230 billion in the next five months. He said that in the current fiscal year, bank deposits will reach Rs 450 to 500 billion and loan disbursement will reach Rs 400 billion.

He said that since BFIs are doing business by taking many times more than their capital from the general public, they should give priority to depositors rather than borrowers.

He said that there are a lot of talks about borrowers in the market, but nothing about depositors. KC added that now the banking sector is also under pressure as banks have to think about the protection of depositors.

KC further said that although there have been some positive signs in the economy recently, the economy is yet to fully recover.

According to him, NRB extended the time for disbursing loans to small and domestic businessmen at the request of the banks, which will bring some relief. He added that the situation of bad loans in the banking sector is increasing and even the loans disbursed during the Covid-19 period are yet to be recovered. He said that the state of bad loans of banks is 2.24 percent.