KATHMANDU: Commercial banks in Nepal are now offering fixed deposit interest rates as low as 6.54 percent yearly, a dramatic decrease from an average of 10.53 percent in August 2023. Low loan demand and high loanable funds were the preceding conditions that led to this drop. Interest rates on fixed deposit accounts have dropped by an average of 3.99 percentage points over the past year due to a fall in economic activity and credit demand.
According to the most recent data, Nepal's banks and financial institutions (BFIs) have Rs 6.450 trillion in deposits and Rs 5.184 trillion in loans outstanding. The ratio of credit to deposit has dropped to 78.96 percent, below the 90 percent regulatory standard. Around Rs 350 billion in loanable funds have been underutilized as a result of this disparity, in part because banks are finding it difficult to achieve the required capital adequacy standards.
For BFIs, the central bank sets a minimum capital adequacy ratio of 11.5 percent, and increases in this percentage are predicted to drive up loan issuance. At 17.16 percent, Standard Chartered Bank now holds the greatest capital adequacy ratio, while NIC Asia Bank has the lowest, at 11.18 percent. Banks may soon lend more money, according to recent advances in the capital adequacy ratio.
In the fiscal year 2023–2024, commercial banks increased their lending with shares as collateral by 19.88 percent. Loans in this category climbed from Rs 58.67 billion at the end of FY 2022–2023 to Rs 70.34 billion by mid-July 2024. Six of the twenty commercial banks reduced their loan proportion, while fourteen boosted their loan share.
.jpg)