Interest rate declines after banks reduce deposit and lending rate

April 8, 2020 | Investopaper

With the approach of new year 2077, commercial banks have reduced the interest rate on its various deposits and loans products.

Banks have published the new interest rate to be effective from April 13, 2020 (Baisakh 1, 2077). Commercial Banks have lowered the rates on deposits as well as loans. The interest rate on fixed deposit is set at a maximum of 8.25 percent, a decline from the previous 9.25 percent. Likewise, the savings rate will provide up to 5.50 percent interest. Earlier banks offered up to 6.50 percent interest on its savings products.

Similarly, the banks have also slashed the rates on its loans. In order to ease the pressure on borrowers during this lockdown period, the banks will float the loans with a premium of up to 5 percent over the base rate. With the fall in deposit rate, the base rate is also expected to fall.

As the economy is in a sluggish phase with the nationwide corona lockdown, this might be a ideal time to reduce the interest rate. The lower interest rate will encourage more credit which will expand the economic activities after this stagnant phase.  Also, the lowering of rates will provide some relief to the borrowers who have hugely suffered at this period of economic shutdown.

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