Executive Summary

This blog provides a comparison of Fixed Deposit (FD) interest rates for the months of Shrawan 2082 and Asar 2082. The interest rates are shown on an annual basis. It highlights the changes in the highest FD interest rates offered by 20 commercial banks. The comparison covers both individual and institutional depositors. Since Fixed Deposits are a popular form of investment, this blog aims to help investors make better and more informed decisions.

Introduction:

Among the 20 commercial banks, Standard Chartered Bank offers the highest Fixed Deposit interest rate 6.26% for individuals and 3.00% for institutions. Compared to Asar, the individual interest rate has increased by 0.16%, while the institutional rate has remained the same. On the other hand, Prabhu Bank Limited offers the lowest interest rates, with 4.25% for individuals and 3.25% for institutions. Compared to Asar, these rates have dropped significantly -by 30.33% for individuals and 35% for institutions.

Overall, the commercial banking sector saw a slight decline in average interest rates in both categories. The average individual rate fell by 0.20%, and the institutional rate dropped by 0.26%. This decline suggests that banks are being more cautious in their interest rate offerings.

Comparative interest rate analysis:

In Shrawan 2082, Standard Chartered Bank offered the highest fixed deposit interest rate for individual depositors at 6.26%, making it the top performer in that category. For institutional depositors, NIC Asia Bank and Everest Bank provided the most attractive rate of 6.25%. Among the banks that increased their rates, Himalayan Bank made the most significant adjustments, with a 9.09% rise for individual deposits and a notable 25.00% increase for institutional ones. Standard Chartered Bank also slightly raised its individual deposit rate by 0.16%, reflecting a mild upward revision.

On the other hand, several banks reduced their fixed deposit interest rates during this period. Prabhu Bank made the steepest cuts, lowering rates by 30.33% for individual depositors and 35.00% for institutional clients. Citizens Bank International also decreased its rates by 2.65% for individuals and 25.00% for institutions. Similarly, Sanima Bank, Prime Commercial Bank, and Nepal Investment Mega Bank reduced their rates across both categories, showing a broader downward trend. Meanwhile, some banks—namely NMB Bank, Global IME Bank, Machhapuchchhre Bank, and Siddhartha Bank—kept their interest rates unchanged during the review period.

Key observation:

Most of the banks have reduced their interest rates for both individual and institutional Fixed Deposits. The main reason behind this is Nepal Rastra Bank (NRB)’s decision to lower the deposit collection rate the lower bound of the interest rate corridor from 3% to 2.75%. This rate acts as a benchmark or minimum limit for how low banks can go when setting their FD interest rates. As a result, commercial banks were allowed to reduce their FD rates accordingly. 

At the same time, Nepal is currently facing excess liquidity in its banking system. To manage this surplus, NRB has been regularly withdrawing funds from banks through open market operations. Nepal Rastra Bank (NRB) has withdrawn Rs. 60 arba from the banking system in response to the increasing levels of excess liquidity in banks and financial institutions. To manage this, the central bank will use a 63-day deposit collection instrument, a short-term tool designed for liquidity absorption.