Kathmandu, March 12

NIC Asia Bank’s hopes of garnering the support of Nepal Rastra Bank (NRB) in resolving the tensions with Nepal Bankers’ Association (NBA) were dashed today as the central bank refused to intervene in the matter.

Following the NBA’s decision to stop inter-bank transaction with NIC Asia, the board of directors and high-level management of NIC Asia had met with the high-ranking officials of the NRB — the central regulatory and monetary authority — today.

NIC Asia Bank tried to convince the central bank officials that the bank had decided to offer high interest in deposits compared to other commercial banks as a large chunk of its deposits is going to mature at the end of third quarter. “Our move was aimed at preventing the situation of overshooting the credit to core capital cum deposit (CCD) ratio at the end of third quarter,” NIC Asia’s officials explained.

However, the NRB officials recommended NIC Asia Bank to resolve the dispute with NBA by itself as the central bank could not help NIC Asia Bank in this regard. Stating that the central bank has no authority in governing the interest rates, NRB has urged NIC Asia to keep its interest rate at an ideal level.

“We have asked them to settle their differences amicably through dialogues and discussions among themselves as this issue does not fall under the domain of the central bank as we believe in free market economy,” Narayan Prasad Paudel, the central bank spokesperson, told The Himalayan Times.

He, however, said that the other banks could not isolate NIC Asia.

Following the scarcity of fresh deposits, the commercial banks in operation had earlier entered into a gentlemen’s agreement to keep the interest rate on deposits at the level of eight per cent. Hence, NBA members were stunned when NIC Asia, last week, announced interest rate of up to 10 per cent in its savings scheme. Subsequently, the NBA decided to suspend all inter-banking transactions with NIC Asia Bank.

The members of NBA were unavailable for comment today.

One of the board directors of NIC Asia Bank said that there is a slim chance than the bank will roll back its published interest rate. “We are collecting deposits by offering high rates not to expand loans, but to maintain the CCD,” the board director stated.

NIC Asia Bank CEO Laxman Risal had resigned last week citing the pressure from board of directors to raise the interest rate.