Liquidity Crunch Fuels Bank Interest Rates

Liquidity crunch has started fuelling the banks interest rates that were till last year hovering around and below five per cent.

"A huge amount of money is going to be invested in mega projects like Upper Tamakoshi soon and the banking sector will feel the heat," said Kishore Maharjan, chief executive officer (CEO) of Sunrise Bank - the 23rd commercial bank.

Maharjan also forecast liquidity crunch in six to eight months.

"We believe that in six to eight months, there will be a massive liquidity crunch in the market," he said.

He added that Sunrise Bank has, targetting the coming critical period, launched a fixed deposit product Sunrise Nava Barsha 2066 Muddati Patra that gives nine per cent interest per annum.
Though the established commercial banks are in comfortable position, new banks may have to face a critical situation if they do not plan ahead.

"The days of following institutional depositors in a cut-throat competition offering them highest rate at the cost of individual customers are gone," Maharjan added.

Sunrise is targetting individual depositors who are getting low interest rates on their hardearned money, according to Maharjan. Sunrise has earlier announced it will float 3.75 million-unit primary shares worth Rs 375 million.

The bank has also tried to lure more depositors by bringing another new product called Share Lagaani Khata offering 6.75 per cent interest per annum.

The recent heavy withdrawal from commercial banks due to the government's fears has also compelled banks to increase the interest rates.