Wednesday, February 13, 2008

Commercial banks pay small investors negligible rate

Commercial banks pay small depositors negligible interest on their hard-earned savings — almost half of what they offer the institutional depositors. While small depositors are offered two to three per cent interest rates, the big institutional depositors get more than five per cent.
Interest rate disparity is due to central bank's deregulation. blame some bankers. Krishna Bahadur Manandhar, acting governor of Nepal Rastra Bank said that liquidity crunch is causing disparity not the deregulation.
"When there will be no liquidity crunch, the banks will automatically offer more interest rates to the small depositors also," he added.
Suman Neupane, chief executive officer (CEO) of Global Bank said that his bank is not discriminating between the small depositors and corporate depositors. "We offer four per cent interest for the small depositors in the normal savings, whereas the corporate depositors gets 5.5 per cent," he said.
Anil Shah, CEO of Nabil Bank also agreed that there is interest rate disparity. "But the depositors can choose as there are more banks and they offer different interest," he said, adding that the present disparity is due to need of banks and liquidity crunch.
"Its not discrimination rather need of the banks," he said.
However, the disparity in interest rates is blamed for the capital flight in recent days.
If the rising inter-bank lending rate that is hovering over eight per cent up from 3.5 per cent in mid-July is any indication, the small depositors should also get more interest rate, said one banker.
The rising interest rate would, on one hand discourage capital flight and on the other encourage savings habit.

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