No more than 12pc interest for big depositors

KATHMANDU, JUN 07 -

Institutional depositors including the Employees’ Provident Fund, the Citizens Investment Trust, and the Army Welfare Fund, among others, are seeing a fixed interest rate on their deposits

With commercial banks implementing their “gentlemen’s agreement” of not offering an interest rate of more than 12 percent on institutional deposits, that’s what big depositors have been earning on almost all their investments.

Institutional depositors including the Employees’ Provident Fund (EPF), the Citizens Investment Trust (CIT), and the Nepal Army’s Army Welfare Fund (AWF), among others, are seeing a fixed interest rate on their deposits.

Banks had agreed to offer not more 12 percent on fixed deposits of institutional depositors after the interest rate rose above 13 percent amid a liquidity crunch. Banks have been complaining that they had been forced to charge unaffordable lending rates as a result of increased interest on deposits.

“All the deposits we have with the banks are earning a 12 percent interest,” said Ramesh Bhattarai, administrator of the EPF. The EPF has deposits of Rs 29 billion in 28 banks. It is the same with the CIT. “We are getting 12 percent interest on all our deposits in commercial banks,” said Sushil Aryal, deputy executive director of the CIT. “However, they have been paying the interest on a monthly basis instead of annually as a small concession on their part,” he added.

The CIT has deposits of Rs 10 billion in commercial banks, Rs 3 billion in finance companies and Rs 2.5 billion in development banks. However, it has been receiving a higher rate of interest from development banks and finance companies.

Most of the AWF’s deposits are also getting 12 percent interest after banks implemented the interest regime. “There may be few deposits which mature in three to five years earning a lower or higher rate of interest,” a senior NA official said.

The army has Rs 160 million in deposits in different banks and financial institutions, 92 percent of which has been deposited in commercial banks, according to the NA.

With the liquidity crunch continuing for the last one and a half years, bankers have been continuing to implement the “gentlemen’s agreement” on the interest rate. “Our decision to limit the interest rate on deposits last year has saved the business community from high interest rates,” said Ashoke Rana, president of the Nepal Bankers Association.



Posted on: 2011-06-07 09:04

http://www.ekantipur.com/2011/06/07/business/no-more-than-12pc-interest-for-big-depositors/335295.html