Commercial banks have made further cuts to interest rates on personal term deposits for the month of June amid rising excess liquidity in the banking system. The reductions come even as the central Nepal Rastra Bank continuously mops up surplus funds from banks.

Out of the 20 operating banks, 11 have decreased deposit rates, three increased rates, while the remaining maintained status quo. On average, banks reduced interest rates on personal term deposits by 0.12 percentage points.

With loan demand remaining subdued, banks have turned to reducing rates on long-term personal deposits to lower funding costs from the excess liquidity. "The demand for loans does not increase immediately and the pressure on the capital of many banks has reduced the interest rate due to lack of 'aggressive' loan expansion," a banker explained.

However, most banks continued offering slightly higher rates on longer-tenure deposits compared to short-term deposits. The Nepal Rastra Bank has capped the differential between the maximum interest rate on individual term deposits and the minimum savings deposit rate at 5 percent. Call deposit rates cannot exceed 50 percent of the savings deposit rate.

To control volatility, the central bank has directed banks to limit monthly changes to within 10 percent of the average rates of the previous month for each bank category. Banks can reduce savings and call deposit rates only after lowering term deposit rates.

Within these parameters, banks Krishi Bikas, Nepal Bank, Nepal Investment, Mega, Siddhartha, Standard Chartered and Prabhu continued offering the upper limit rates on individual term deposits.

Krishi Bikas Bank offered the lowest 5.6661 percent rate across all tenures from 1 to 5 years, while Everest Bank's lowest rate was 5.75 percent for deposits above 2 years.

Bucking the dowtrend, Himalayan Bank increased rates to 8.25 percent for 5-10 year personal term deposits from 7.5 percent in May. Nabil Bank raised its rate to 7 percent from 6.75 percent for deposits above 5 years. Machhapuchhre Bank hiked its rate to 7.5 percent for deposits beyond 3 years, up from a maximum of 5.26 percent.

Other banks that trimmed rates included National Commercial Bank, Nepal SBI, Laxmi Sunrise, Global IME, Kumari, Prime, Sanima, Citizens, NMB and NIC Asia.

The frequent interest rate revisions reflect the liquidity surfeit challenging Nepali banks as credit offtake remains muted amid the economic slowdown.

Notes:

• Up to 5% cap refers to the maximum interest rate allowed by Nepal Rastra Bank for individual term deposits.

• The table shows the general trend and may not reflect all specific rates offered by each bank.

• For specific rates and details, it's recommended to contact the respective banks directly.