The current liquidity crisis has provided a good opportunity for institutional depositors to haggle for higher interest rates on their fixed deposits with banks and financial institutions.
After the onset of liquidity crisis some three and a half months ago, the interest rates on institutional deposits, inter-bank lending and standing liquidity facility has quickly soared to more than 14 percent.
The cash crunch has also propelled banks to offer more interest rate in order to retain old depositors as well as to allure new ones.
Targeting institutional and other big depositors, almost all commercial banks have increased interest rate on fixed deposit to 10 to 12 percent on an average.
Nepal Telecom, National Insurance Corporation, Employment Provident Fund, Citizens' Investment Trust, Army Welfare Fund and Police Welfare Fund are institutional depositors of the country.
According to sources, the institutional depositors alone account for some 25 percent of the total deposit of Rs 44 billion in the banks and financial institutions.
In fact, some banks have also internally hiked interest rate to tap promising depositors in their respective fold.
The privately operated commercial banks have been under pressure to increase interest rate after the state-run banks like Nepal Bank, Rastriya Banijya Bank and Agricultural Development Bank did so.
Some bankers believe that it is not prudent on the part of institutional depositors to haggle for higher interest rates.
“Institutional depositors should help us to cope with the crisis so that we could lend at cheaper rates to the business community,” they state. nepalnews.com