Commercial Banks Raise Interest Rates After So Long; Is This Responsible for NEPSE's Decline?

Commercial Banks have started to unveil their updated interest rates profile for the month of Chaitra.

While banks were on interest rates slashing race because of piling liquidity during the pandemic, banking sources now say that the liquidity is gradually reverting to its normal state. It is logical that things won't be as messed up as the time when we were in a nationwide lockdown and businesses were brought to a complete halt.

Interest Rates Change on Savings

It seems that the falling interest rates on savings have reversed their trend. For the first time after so many months, commercial banks have increased the interest rates on various savings schemes. 

Interest Rates Change on Fixed Deposits for Individuals

Depositors will now get higher interest payments on fixed deposits too. It seems that commercial banks have either retained the previous interest rates profile or increased the rates. 

Interest Rates Change on Fixed Deposits for Institutions

Selective data sampling was done in this research article. This is not representative of all the commercial banks.

Impact on the Stock Market

The stock market is highly sensitive to change in interest rates. The NEPSE index made its all-time high after the lockdown, which was partly fuelled by the fall in interest rates. As keeping money idle in savings began to yield lower returns, depositors channeled their funds to the stock market instead. 

While the cyclical trend of the NEPSE index signals that the index might actually be in an extended bull cycle, the rise in interest rates may influence investor sentiment on the stock market, at least temporarily. As to where the index is headed is completely in the hands of investors.