Kathmandu, January 3

Nepal Rastra Bank (NRB) is unhappy that Employees Provident Fund (EPF) and Citizen Investment Trust (CIT) are contributing a large chunk of institutional deposits in banks and financial institutions (BFIs).

EPF and CIT, both government-owned entities, have been destabilising the market by withdrawing funds from one bank to deposit it in another to take advantage of marginal interest rate hike, as per a high ranking central bank official.

“EPF and CIT are operating like ‘livestock traders’ by capitalising on the current situation, when the banks’ capacity to expand loans is saturated,” the NRB official said, adding, “This has been destabilising the interest rates.”

The central bank has urged the bankers to stop messing around with institutional deposits and the members of Nepal Bankers’ Association today reached a consensus that they will not raise the interest rate of institutional deposits above 11 per cent.

“At a time when EPF and CIT could play a pivotal role in stabilising the market, their actions are highly irresponsible in the current situation when the banks are facing lack of fresh sources of deposits,” according to central bank officials.

The NRB has allowed banks to take up to 50 per cent of the total deposit from institutional depositors. The central bank is preparing to issue a circular for the banks to stick to the published rates for institutional depositors at least for one quarter to ensure stability in interest rate of loans.