Commercial Banks Keep Interest Rates Unchanged for Baisakh, LC Prohibited for Non-Essential Import

Commercial Banks have agreed to keep interest rates unaltered for the month of Baisakh.

A meeting of the Nepal Bankers’ Association, the umbrella association of the commercial banks in Nepal, held on Sunday decided to retain the currently maintained interest rates for the upcoming month of Baisakh.

Commercial Banks had raised their interest rates for the month of Falgun after keeping their interest rate profile unchanged in Magh. The rates were not changed for Chaitra. With the new agreement between the banks, the month of Baisakh will also not witness any changes in the interest rates of commercial banks.

Thus, most commercial banks provide a 6.03% interest rate p.a. for depositors on savings. Meanwhile, individuals will get a maximum interest payment of 11.03% p.a. on fixed deposits. On the other hand, institutions will get a 10.03% interest payment p.a. on fixed deposits.

Furthermore, it was also decided in the meeting that commercial banks will not allow opening of Letter of Credit (LC) for non-essential imports.

In an emergency meeting previously held with the CEOs of 27 commercial banks, Nepal Rastra Bank had strongly instructed the banks not to open letters of credit (LC) for the purpose of importing non-essential items. The central bank gave strict instructions as a brute force way to combat the deficit in the balance of payments.

The balance of payments of a country, also known as the balance of international payments, is the difference between all money flowing into the country in a particular period of time and the outflow of money to the rest of the world.

Meanwhile, the letter of credit, or "credit letter," is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time. LCs are integral to establishing trust among cross-border traders, and they ensure an international transaction happens.