Nepal’s commercial banks have moderately reduced deposit interest rates for the one-month period beginning Monday, August 17, amid continued excess liquidity in the banking system.
According to notices published by all 20 commercial banks, the average interest rate on individual deposits has fallen to 4.13 percent, down from 4.17 percent. Institutional deposit rates have also declined from 3.116 percent to 3.081 percent.
Five banks—Siddhartha Bank, Citizens Bank, Nepal Bank, Kumari Bank and Standard Chartered Bank—have reduced their rates, while the remaining 15 banks have maintained their existing rates.
Siddhartha Bank made the largest reduction, cutting rates by 0.29 percentage points for individual depositors and 0.20 percentage points for institutional customers. Its new rates stand at 3.76 percent and 3.05 percent, respectively.
The continued decline in deposit rates reflects the banking sector’s high level of excess loanable funds. Banks and financial institutions currently have more than Rs 1.3 trillion in loanable funds but have struggled to expand lending amid weak credit demand.
BFIs are also placing excess funds with Nepal Rastra Bank at interest rates as low as 2.50 percent. Meanwhile, the banking sector holds deposits of around Rs 8.244 trillion, with approximately Rs 5.936 trillion invested in loans.
Strong remittance inflows, exceeding Rs 200 billion per month in recent months, have further increased liquidity in the banking system, putting continued downward pressure on deposit interest rates.
