Nepal’s banking sector has once again revised its interest rates on fixed deposits for the month of Shrawan, following the recent monetary policy announcement by the Nepal Rastra Bank (NRB). After the central bank slashed its policy rate from 5% to 4.5%, most commercial banks responded by adjusting their deposit rates downward. This move is part of a broader effort to address excess liquidity in the financial system and stimulate lending activity.
Out of the 20 major commercial banks in Nepal, 14 have decreased the maximum interest rate offered on individual fixed deposits, while four banks have kept the rate unchanged. Only two banks — Himalayan Bank and Standard Chartered — have slightly increased their rates. On average, the maximum interest rate on personal fixed deposits has dropped by 0.215 percentage points compared to the previous month. The rate now stands at 5.687%, down from 5.902% in Asar.
The central bank’s decision to lower the policy rate has also been accompanied by reductions in other key interest rates. The Standing Liquidity Facility (SLF) rate was brought down from 6.5% to 6%, and the Standing Deposit Facility (SDF) rate was trimmed from 3% to 2.75%. These measures have collectively put pressure on banks to revise their deposit rates as the return on excess reserves held at NRB has fallen.
This drop in interest rates also reflects the financial system’s liquidity surplus. According to data from the NRB, as of the end of Asar, the central bank had absorbed more than Rs. 692 billion from the market — nearly double the liquidity absorption compared to the same period last fiscal year. With banks struggling to expand lending despite increased capital spending in Asar, excess funds continue to pile up, prompting further downward pressure on deposit rates.
Some banks, such as Prabhu Bank, made significant cuts to their rates — with a reduction from 6.10% to 4.25% — while others like NIC Asia and Everest Bank also implemented noticeable decreases. On the other hand, Himalayan Bank raised its rate by 0.5 percentage points, signaling that not all banks are reacting uniformly.
Bankers argue that this trend of falling interest rates is likely to continue unless credit demand picks up. With economic activity still recovering and financial indicators improving gradually, the current monetary environment is expected to remain relaxed for some time. The adjustments in interest rates highlight the need for a balanced strategy between managing liquidity and encouraging productive lending.
