Market Trends in the Nepalese Banking Sector
Interest wars a curse to the Nepalese banking sector ……
The banking industry of Nepal doesn’t seem to be going in right track. The ongoing interest war and expansion of banking network unprecedentedly has further aggravated the problem. Till date there are already 31commercial banks, 75 development banks & 84 Finance Companies in the country. Further few are in pipeline. Alone in Kathmandu there are more than 100 private commercial banks involved in the competition. Opening of branches and the installation of ATM machines has led to more idle cash lying around at branches and machines. With the liquidity crunch banks are having a run for deposit. Banking and financial institutions are facing tough time to honor customer’s obligations. Liquidation of Nepal Development Bank Ltd., liquidity crunch of last September and recent charge sheet filed against top honcho of two of the development bank still haunts the depositors. They would rather feel safe to keep money in their home than to put in bank. The banks/FIs are luring depositors with higher interest rate. The interest rates vary from 10.25 % in savings to 12% in fixed deposits. Today the Nepalese banking sector due to stiff competition and excessive saturation face an informal interest wars where to allure the mass they provide competitive edge through high interest rates. Banks today are fighting for existence and their bread to keep them alive is the high interest they are providing to the customers against deposits.
The wave of currency and banking crises that began in 2008 had come across as bearish with regards to the prospects for the Nepalese economy, but it's worth asking what exactly "bearish" means. It is the expectation below-trend growth. Is this real risk to the Nepalese economy? I see some of them as being fatal. And the opportunity cost is high. Years of economic slack mean missed chances at investment, innovation, and opportunity.
Recent liquidity crunch in the money market has caused
The banking industry of Nepal doesn’t seem to be going in right track. The ongoing interest war and expansion of banking network unprecedentedly has further aggravated the problem. Till date there are already 31commercial banks, 75 development banks & 84 Finance Companies in the country. Further few are in pipeline. Alone in Kathmandu there are more than 100 private commercial banks involved in the competition. Opening of branches and the installation of ATM machines has led to more idle cash lying around at branches and machines. With the liquidity crunch banks are having a run for deposit. Banking and financial institutions are facing tough time to honor customer’s obligations. Liquidation of Nepal Development Bank Ltd., liquidity crunch of last September and recent charge sheet filed against top honcho of two of the development bank still haunts the depositors. They would rather feel safe to keep money in their home than to put in bank. The banks/FIs are luring depositors with higher interest rate. The interest rates vary from 10.25 % in savings to 12% in fixed deposits. Today the Nepalese banking sector due to stiff competition and excessive saturation face an informal interest wars where to allure the mass they provide competitive edge through high interest rates. Banks today are fighting for existence and their bread to keep them alive is the high interest they are providing to the customers against deposits.
The wave of currency and banking crises that began in 2008 had come across as bearish with regards to the prospects for the Nepalese economy, but it's worth asking what exactly "bearish" means. It is the expectation below-trend growth. Is this real risk to the Nepalese economy? I see some of them as being fatal. And the opportunity cost is high. Years of economic slack mean missed chances at investment, innovation, and opportunity.
Recent liquidity crunch in the money market has caused