Kathmandu, March 9
Nepal’s bankers’ association says 27 of its member banks will not carry out transactions with NIC Asia, one of the country’s leading commercial banks, after it raised interest rate on fixed deposits.
The association said that the bank indulged in unfair practice by hiking interest rate above what was agreed among members of the association. Following the decision, NIC Asia can neither borrow from or lend to any of the 27 major banks in the country.
NIC Asia, on Friday, had announced that it would provide 12 per cent interest on fixed deposits–one percentage point above the ceiling fixed by the association. The bank says interest rates should be determined based on the market dynamics and bankers should not tamper with it. “Interest rates are to be determined by demand and supply in an open economy,” the bank’s acting CEO Roshan Kumar Neupane told Onlinekhabar. He also added that the association cannot dictate interest rates.
The decision will not affect account holders’ inter-bank transactions but it will make it difficult for NIC Asia to receive short-term loans from other banks. NIC Asia will now have to go the Central Bank to get money. It will have to pay an interest of 7 per cent at a time when other banks are carrying out transactions at interest rates as low as 4.4 per cent.
