July 23, 2023 | Investopaper
On Sunday, Nepal Rastra Bank, disclosed its monetary policy for the current fiscal year 2080/81. Through the monetary policy, the policy rate has been revised downwards to 6.5 percent from the previous 7 percent. This reduction in the policy rate, which serves as the benchmark for interest rates in the country, is expected to have significant implications on the cost of short-term loans availed by banks from the central Bank.
The policy change is projected to exert pressure on banks to lower their overall interest rates in response to the reduced policy rate. As a result, borrowers may benefit from reduced interest expenses on short-term loans taken from the banks associated with the central Bank.
Despite the revision in the policy rate, the current bank rate limit remains unchanged at 7.5 percent. The bank rate refers to the interest rate charged by the Nepal Rastra Bank when providing loans to other banks for liquidity management purposes. The decision to maintain the bank rate limit is likely aimed at ensuring stability and liquidity in the financial system.
In addition to the policy and bank rate adjustments, the deposit collection rate has also been revised in the monetary policy. The deposit collection rate has been decreased from 5.5 percent to 4.5 percent, which may impact the interest rates offered by banks on deposits. This measure may influence the overall savings and investment patterns within the country’s banking sector.