Banks update interest rates for Mangsir; How will the change affect NEPSE?

Commercial Banks, Development Banks, and other financial institutions have updated the interest rates for the month of Kartik.

Following Nepal Rastra Bank's instruction to update the interest rates profile for a month beforehand, the BFIs have updated the rates today on the last working day of Kartik. The update will be effective from Mangsir 01.

When we look at the updates of commercial banks, it is evident that no bank has made no change to the interest rates on savings. Only Nabil Bank has brought the range down to 1.5 - 3.5% from the previous 2 - 4%. This shows that the Nepalese economy still has excess liquidity, a result of increased savings and decreased borrowings.

When we look at the rates on fixed deposits, the interest rates profile hasn't changed.

The base rate update is of great interest to stock investors. Declining base rate means investors can expect further cut in the interest rate offered by the banks. This is because interest rates and the stock market have an inverse relationship: one goes down when the other goes up and vice versa. The recent uptrend of NEPSE can be partially attributed to the excess liquidity in the economy and the slashing of interest rates that followed.

When we look at the interest rate updates, we see that the base rate has declined for all the commercial banks under our study. The change is substantial for some banks while it is minimal for some. Nevertheless, the rates have gone down indeed.

Also, by the decline of base rates, interest rates of loans have gone down as well. The margin lending rate is of more concern to an investor. Well, since these rates are hooked to the base rate, they have gone down too. As of now, the unchanged or decreased interest rates on savings indicates that the liquidity imbalance hasn't improved.