Interbank Interest Rate in Declining Trend

December 11: The daily weighted average interbank interest rate during the last week has declined. According to the report published by Nepal Rastra Bank (NRB), the rate reached 1.95 per cent in the last day from 2.79 per cent of the first day during the last week. The decreasing interbank interest rate indicates of mounting liquidity in the market.

In the initial phase of the current FY, the rate was 1.14 per cent. The rate gradually decreased to 0.36 per cent during the month which is the least interbank rate of the current FY. However, the rate rose to 4.2551 per cent during the festive season of Dashain-Tihar. After the festive season, the rate increased to 4.3511 per cent once which is the highest rate of the current FY. After the raise, the interbank interest rate was once again in decreasing trend and reached 1.9550 on December 2.

The declining interbank interest rate since last two weeks indicates of decreasing liquidity problems in banks and financial institutions (BFIs).  It also shows the potential decline in interest rate given on deposits by BFIs.  The BFIs offered 7-8 per cent interest rate on deposits two weeks ago citing lack of liquidity.