Banks have started reducing interest rates on deposits after Nepal Rastra Bank reduced policy rates through the first quarter review of monetary policy.

With the review of the monetary policy, the central bank reduced the bank rate from 7.5 percent to 7 percent and the policy rate from 6.5 percent to 5.5 percent. Following the central bank’s move, the banks also started reducing the interest rates with immediate effect by publishing notices.

The central bank's decisioncame at a time when banks are seeing their credit extension capacity already increasing though they are still very cautious in extending new loans. As a result the centrl bank is increasing its efforts to mop up the excess liquidity.