Banks are preparing to reduce interest rates on savings from July as loans continue to decline but deposits continue to rise.

The loan amount is declining now than before the lock-down. Deposits are growing at a relatively high rate. On the one hand, there is pressure to reduce the interest on loans, on the other hand, the cost of deposits has to be reduced.

The double-hit bankers are preparing to reduce the interest on deposits from July 20. Bankers are holding informal talks to reduce interest rates. Meanwhile, NIC Asia Bank has slashed interest rates on savings by half a percentage point.

According to the latest figures, the debt of banks has declined by Rs 29 billion from mid-April to June 12. While deposits have increased by Rs 87 billion.

Due to high improvement in deposits and declining credit, deposits (loans) have come into balance. 

In the last three years, credit disbursements have been higher than deposits in banks. Bank deposits are on the rise and loans are on the decline.

As a result, the CCD ratio of banks has dropped to an average of 74 percent. On the one hand, the resources have increased and on the other hand, the NRB has reduced the deposits above two years due to the removal of CCD. At present, the high CCD rate is 77 percent and the low is 65 percent. According to the regulatory provision, it should be less than 80 percent. Some time ago, the CCD of banks had reached 79 percent.

Banks were ready to reduce interest rates on deposits after the National Bank of Nepal (NBB) directed to reduce loan interest rates by 2 percent from April to July. However, banks have been stunned till July after the governor gave verbal instructions not to reduce interest rates on deposits. Banks will reduce interest rates on deposits after July.

Banks are preparing to reduce interest rates on deposits by one to two percentage points. At present, the maximum interest rate for institutional deposits is 7 percent, for individuals it is 8.75 percent and for savings it is 5.5 percent.