Kathmandu, February 25

Bankers have urged the Nepal Rastra Bank (NRB) to change the method of calculating interest rate spread through the mid-term review of Monetary Policy.

At discussion programme held by the central bank today, the bankers said that provisions aimed at reducing profit of banks will affect the entire banking and financial sector and asked NRB to review such provisions.

“It is high time to promote merger and acquisition policy of banks and financial institutions (BFIs) to make the financial sector more reliable and robust. However, provisions related to spread rate calculation and others have been affecting banks, which need to be reviewed,” said Bhuvan Dahal, president of Nepal Bankers’ Association (NBA) — the umbrella organisation representing 27 commercial banks in the country.

He added that the government policies should not affect the income of banks BFIs are expanding their services and network and making huge investment in technology and security.

In August, NBA had officially objected the NRB’s decision to revise the formula to calculate the spread rate that banks are required to maintain. The change in the calculation of spread rate will directly affect the income tax being paid by banking sector and also hit lending capacity of banks, as per NBA.

According to NRB’s rule, banks cannot include their interest-earning from investments in government securities while calculating the spread rate as allowed earlier.

The central bank has also barred banks from incorporating the earnings from investment in the spread rate calculation.