KATHMANDU: Several commercial banks in Nepal have opted to decrease the interest rates on deposits, effective from Tuesday. The decision comes as these banks aim to maintain fixed deposit interest rates at a maximum of 7.06 percent per annum, down from the current average of 7.14 percent. This move is attributed to a sluggish demand for loans coupled with an excess liquidity situation prevailing in the banking sector.

Data from the Nepal Rastra Bank (NRB) reveals that commercial banks have amassed deposits totaling Rs 5.461 trillion, while loans extended amount to Rs 4.520 trillion. This indicates an excess liquidity of Rs 941 billion, with the credit-deposit ratio falling to 80.51, below the central bank's ceiling of 90 percent. Nine out of 20 commercial banks have announced reductions in their deposit interest rates, including prominent names like Everest Bank, Nabil Bank, and Rastriya Banijya Bank.

Most banks have set their deposit interest rates below 8 percent, with institutions like NMB Bank and NIC Asia Bank maintaining the highest fixed deposit rates at 7.8 percent per annum. Concurrently, lending rates across commercial banks have dropped to an average of 10.55 percent as of mid-April, marking the lowest levels in 27 months. Banks are now adjusting their deposit rates to trim their cost of funds, with expectations that lending rates will follow suit in the near future. Despite the central bank's targets for increased private sector lending, actual lending growth remains below expectations, signaling challenges in stimulating credit demand.