Kathmandu. After the decrease in the demand for loans in banks, the opinion that the interest rate on deposits should be reduced from January 1 is getting stronger. Bankers say that even in the middle of January, there is no pressure on liquidity and when the interest rate is high, there is no demand for loans, so there is a strong opinion that the interest rate should be reduced.

Banker Sudesh Khaling says that due to the market conditions, the interest rate should be reduced. Since the growth of credit is only low compared to non-cash deposits and there is no demand for credit when the interest rate is high, the interest rate on deposits has to be reduced from January.

In the bankers' association, some banks were of the opinion that the deposit interest rate should be reduced in January itself. However, it kept the interest rate of deposits stable in January, saying that it would only take a decision based on the pressure on the banking system.

Most of the bankers have come to the conclusion that the deposit interest rate should be reduced from January as there is no pressure on liquidity even in the middle of January. A banker said that by calculating the average of the maximum interest rate given by the banks on fixed deposits in January, the interest rate of deposits may decrease by 10 percent in January.

The private sector has also been increasing pressure to reduce interest rates. The Rashtra Bank, which has revised its working capital loan guidelines under the pressure of the private sector, is also under intense pressure to reduce the interest rate.

Head of Economic Research Department of Nepal Rastra Bank Dr. Prakash Kumar Shrestha says that the provision of cash margin to be kept before the interest rate should be removed when opening an LC for imports.

There is pressure from the International Monetary Fund to remove the cash margin on LCs. We have removed the first import ban, now we have to remove the cash margin," he said. "It is a matter of changing the policy rates by looking at what kind of pressure will be caused by removing the import margin. Now there should not be a situation where the interest rate is reduced and then increased again in 2 months.

He said that even if the cash margin is removed immediately, the policy rates should not be revised. Even if the deposit interest rate is reduced in January, the loan interest rate will have to be reduced until April. Nepal Rastra Bank has linked the loan interest rate to the base rate.

There is a provision of the Central Bank that the interest rate of the loan can be reduced according to the decrease in the base rate on a quarterly basis. According to which, even if the deposit interest rate is reduced in January, the loan interest rate will decrease in Baisakh only based on the decline in the average base rate of January, February and March.