Cartelization of interest rates end, commercial banks to determine themselves

KATHMANDU, July 13: The interest rate determination process of commercial banks will be determined by the banks themselves. Till now, Nepal Bankers Association (NBA) was fixing the interest rate of banks. Now, banks are allowed to reduce interest rates based on open market competition. 

Along with this, NBA's cartelization in interest rate determination has also come to an end. Until now, all the commercial banks had been implementing the fixing of interest rates of the commercial banks according to the agreement of the Chief Executive Officers present at the NBA meeting.

Speaking at a program held in the capital on Tuesday, Finance Minister Dr. Prakasharan Mahat accused the banks of cartelizing interest rates. He alleged that even though there should be healthy competition between banks in the policy of an open economy and the right to determine the interest rate should be left to the market, the banks are working together in cartelizing in the name of consensus.

The Minister of Finance Dr. Prakasharan Mahat expressed his grief that even the central bank had become a silent spectator. Similarly, for a long time in the past, industrialists from all over the country had also been protesting against interest rate cartelization by banks. With the announcement of the finance minister, there was intense pressure on the bank owners and managers and the central bank itself. 

Sunil KC, chairman of the NBA, said that after the pressure increased, the bankers agreed to set the interest rate voluntarily in the meeting. This agreement will be effective from the Nepali month of Shrawan (mid-July) of the upcoming fiscal year 2080/81.