KATHMANDU: Nepal Rastra Bank (NRB) is mulling hiking the bank interest rate, said Nepal Bankers’ Association (NBA) vice-president Rajan Singh Bhandari. Commenting on Nepal Rastra Bank’s recent move to limit investment in real estate and housing, he said, “It is not scientific.”

Commercial banks are already adopting strong norms in

investment, so there is little chance of impact of the NRB directive, he said. “But it will definitely hike the interest rate,” he claimed. According to Bhandari, interest on deposit will go up to nearly 13 per cent at the end of the fiscal year 2009-10.

Currently, commercial banks are offering 7 per cent interest on fixed deposit and above 3 per cent interest on savings account. Development banks and finance companies are offering 10 per cent interest on fixed deposit. “If the trend continues, lending rate will go up to 21 per cent,” said Bhandari, who is also the chief executive officer of Citizens’ Bank International Ltd.

“Commercial banks invest only after risk and benefit analysis, so there is no high risk at all,”

he said adding limitation on investment is good for a healthy business environment. He accused NRB of creating liquidity crunch saying NRB is not providing sufficient money as per the demand of banks.

Citizens’ Bank has 31 per cent lending in real estate and home loans. Real estate alone is 25 per cent, he added addressing journalists at a press meet organized here today. He also Citizens’ deposit and lending ratio was below 80 per cent.