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Commercial banks will reduce interest rates on deposits effective from Magh (mid-January). With liquidity in the banking sector easing, bankers have decided to reduce interest rates on deposits by 10 percentage points. A meeting of the Nepal Bankers' Association (NBA), the association of commercial bank CEOs, on Wednesday decided to reduce the deposit interest rate effective from mid-January. According to this decision, the interest rate for individual fixed deposits for the month of Magh (mid-January to mid-February) will come down to 11 percent from 12.13 percent currently. Similarly, the interest on institutional fixed deposits has also been set at 9 percent from 10.13 percent. The new NBA President Sunil KC said the decision to reduce the interest rate was made according to the guidelines of the Nepal Rastra Bank (NRB). As per NRB's guidelines, banks and financial institutions can reduce the interest rate up to 10 percent. KC, who is the CEO of NMB Bank, was elected for the post of President of the NBA by a special general meeting held on Wednesday after the tenure of Agricultural Development Bank CEO Anil Upadhyaya ended. NBA's decision to slash interest rates came after improvements in deposits in Poush, and the credit-to-deposit (CD) ratio of commercial banks coming down to 86 percent. However, the interest rates on loans will be reduced only from mid-February or mid-March. NBA sources said the bankers decided to reduce interest rates following a request from Finance Minister Bishnu Poudel and Nepal Rastra Bank Governor Maha Prasad Adhikari. The private sector has been protesting against the higher interest rates, arguing that it has made doing business costly for them. After the formation of the new government, the private sector held a series of meetings with the Prime Minister, Finance Minister and NRB Governor where they demanded two things - reduction in interest rates and postponement of guidelines on working capital loans. According to NBA, the base rate will also be revised with the change in the rate of deposits. As the interest rates on deposits and lending are correlated, it will certainly affect the interest rates on loans. As per the NRB data, the banks and financial institutions (BFIs) as of Monday collected deposits worth Rs 5311 billion, an addition of Rs 16 billion in the past five days. Similarly, the total extension of loans stands at Rs 4,778 billion. With the improvement in liquidity position, the CD ratio of banks has come down to an average of 86.65 percent while the interbank rate has also fallen to 6.14 percent from around 8 percent. The central bank had tightened the money supply citing that excessive loans were used to import goods which led the country to a deepening trade deficit and fast depletion of foreign exchange reserves. As a result, the base interest rate increased from around seven percent to up to 11 percent in the past year. Since mid-September, banks have increased their interest rates on fixed deposits by 10 percent to 12.13 percent, while the interest rate on savings accounts is 7.13 percent per annum on average. It has triggered the lending rate to go up to 18 percent a year.  

The price of gold has increased by Rs 500 per tola in the domestic market on Friday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the precious yellow metal is being traded at Rs 103, 900 per tola today. The gold was traded at Rs 103, 400 per tola on Thursday. Meanwhile, tejabi gold is being traded at Rs 103, 400 per tola. Similarly, the price of silver has dropped by Rs 5 and is being traded at Rs 1,365 per tola today.

In a 'season of mergers and acquisitions' in the Nepali banking sector, the proposed acquisition of Civil Bank by the Himalayan Bank Limited (HBL) has moved further ahead with the former's annual general meeting (AGM) approving the swap ratio. The Civil Bank's 12th AGM on Thursday endorsed the swap ratio of 100:80 that the two banks had agreed earlier. This means 100 shares of Civil Bank will get converted to 80.28 shares of Himalayan Bank after the acquisition. According to Pratap Jung Pandey, Chairman of Civil Bank, the unified business will be started within Magh after getting final approval from the Nepal Rastra Bank. For Himalayan Bank, the acquisition has become a sort of a matter of reputation, following the failed merger attempt with Nepal Investment Bank last year. Himalayan Bank started an initiative to acquire another commercial bank after its merger with Nepal Investment Bank Limited (NIB) got derailed at the final stage. The HBL-NIB eight months long merger process was aborted after the 29th annual general meeting (AGM) of HBL held on January 14, 2022, disapproved the plan of merger with NIB. Only 43.63 percent voted in favor of the merger while 42 percent came against the merger. As per the rules, a merger proposal will only be passed after 75 percent of the shareholders of the bank approve it. Three major shareholders of the HBL - Employees’ Provident Fund, N Trading Company, and Chhaya International- stood against the merger. With Nepal Rastra Bank continuously pushing the HBL for the merger, the bank on July 13, 2022, signed an acquisition MoU with Civil Bank. BFIs number declined by 183 in the past decade The number of banks and financial institutions (BFIs) has declined by 183 in the last one decade after NRB announced its merger and acquisition policy. The number of BFIs that stood at 303 in 2012 has come down to 120 as of January 11, 2023. Following the merger, a total of 10 commercial banks, 75 development banks, 61 finance companies, and 37 microfinance institutions have merged with other financial institutions. In 2022, 32 commercial banks, 92 development banks, 78 finance companies, and 111 microfinance institutions were operating in Nepal. Currently, this number has been reduced to 22 commercial banks, 17 development banks, 17 finance companies, and 64 microfinance institutions.

The Nepal Stock Exchange (NEPSE) plunged by 41. 04 points to close at 2,149. 39 points on Thursday. Similarly, the sensitive index dropped by 7. 89 points to close at 411. 25 points. A total of 14,482,959 unit shares of 252 companies were traded for Rs 5. 47 billion. Meanwhile, Kumari Dhanabriddhi Yojana was the top gainer today with its price surging by 10. 02 percent. Likewise, Gurans Laghubitta Bittiya Sanstha Limited was the top loser with its price dropped by 9. 18 percent. At the end of the day, the total market capitalization stood at Rs 3. 10 trillion.