Kathmandu, August 5:

Nepal Rastra Bank (NRB) has directed all commercial banks and finance companies to stop all types of promotional schemes based on lottery to raise deposits.

In a circular issued last week, the central bank quashed its past decision of April 27, and issued a new directive banning all types of lottery-based promotional schemes in commercial banks and finance companies.

However, NRB has stated that banks and finance companies are free to run such schemes that ensure benefits to every depositor in proportionate manner based on the amount in the deposit. While doing so, the banks and finance companies that meet the criteria have to obtain permission from the central bank.

NRB has also made a provision that the banks and finance companies, which have already floated such schemes earlier than the issuance of NRB’s latest circular, can continue them till the end of the current fiscal year 2007-08.

“But, banks and finance companies cannot add new customers and must complete all necessary processes by mid-July next year. Details of the new process can be decided between existing depositors and a company,” Narayan Prasad Poudel, acting executive director at Bank and Financial Institution Regulations Department of NRB, told this daily. He further added that the one-year period has been set for necessary adjustment for those banks and financial institutions, which have already floated such schemes. But from the next fiscal, none of the banks or finance companies are allowed to run such schemes.

The lottery based promotional schemes have become a common trend am-ong many commercial ban-ks and finance companies to allure depositors. Such schemes on deposits range from awarding a car to bungalow, vacation trip to many household goods and gold coins to cash prizes.

The central bank’s latest move came after rising grievances among depositors that the per cent of interest being paid to them has been continuously falling, while financial institutions have been charging higher rates for lending. In recently announced Monetary Policy 2007-08, NRB had stated that necessary measures to push up nominal interest rates would be geared up.

The latest NRB move may cheer up depositors, as it is likely to cause firms make an upward revision of the interest rates, said an official at NRB. “Even though the banking system has excessive liquidity, financial institutions need to mobilise deposits on a regular basis,” he added.