March 14: Following the footsteps of commercial banks, development banks and finance companies are also going to reduce interest rates on deposits from mid-March. A meeting of the Development Bankers Association Nepal, the umbrella organization of development banks, decided to reduce the interest rate on deposits by 0.25 percentage points from March 15.

The association decided to reduce the interest rate by 0.15 percent on personal deposits of 1 year or more and by 0.25 percent for deposits less than 1 year starting from mid-March. At present, development banks are giving maximum interest of 11.75 percent on term deposits, which will now be maintained at 11.60 percent for a period of more than 1 year and 11.50 percent on term deposits of less than 1 year period. Similarly, the interest rate of savings account will be reduced by 0.15 percentage points. Such interest will now range between 6.60 percent to 8.60 percent.

Similarly, the umbrella organization of finance companies, Nepal Financial Institutions Association also decided to reduce the interest rate on 1-year term deposits by 0.20 percentage points to 12 percent from mid-March.

Commercial banks have already decided to reduce the interest rate of general savings by 0.42 percent and the premium rate of loans by 1 percentage point from mid-March. The Nepal Bankers Association decided to keep the fixed deposit interest rate unchanged from mid-March to mid-April.

Banks reduced the interest rate on deposits as the spread rate has to be reduced from mid-March according to the instructions of NRB. In the same way, there is pressure on banks to reduce the interest rate after they were criticized heavily.

After the sharp criticism of the interest rate, NRB announced to reduce the spread rate of the banks through the first quarter review of the monetary policy of the current fiscal year. As per the decision, NRB issued instructions in mid-December and arranged that the commercial banks should reduce the spread rate to 4.2 percent from mid-March 2023 and the development banks and finance companies should reduce it to 4.8 percent. Similarly, from mid-June 2023, commercial banks have to maintain a spread rate of 4 percent and development banks and finance have to maintain a spread rate of 4.6 percent.