Nepal Today

Monday, July 30, 2012


WRIT DEMANDS DISMISSAL OF PM BHATTARAI Kathmandu, 31 July: A writ was filed at the supreme court by two advocates Monday demanding removal of Prime Minster Baburam Bhattarai for ‘unconstitutional’ work without forming a consensus government. The writ petition demanding SC issue show cause notices in the name of the Office of the Prime Minister for making ‘various unconstitutional moves’ in the wake of the dissolution of the Constituent Assembly (CA). Advocates Saroj Kumar Thapa and Paras Mani Bhattarai filed the writ. Article 38(1) of the interim constitution. According to Article 38, the Prime Minister and the Council of Ministers under the chairmanship of the Prime Minister shall be constituted by political consensus. But there’s also a provision for majority government if consensus is elusive. A hearing is scheduled Wednesday. nnnn BANK SPREAD RATE WIDENS Kathmandu, 31 July: The gap between borrowing and lending rates at commercial banks, known as spread rate in banking term, has continued to widen, with almost all of the category ´A´ financial institutions jumping on the bandwagon to reduce deposit rates, while only around a dozen taking similar measure on credit Rates, Rupak D Sharma writes in Republica.. Latest data published in various national dailies show commercial banks slashed interest on one-year fixed deposit by as much as three percentage points and savings rate by as much as 1.5 percentage points in the last three-month period. In contrast, lending rates on consumer loans, such as auto and home, and corporate loans, such as term and overdraft, fell by up to two percentage points. Among banks that topped the list in revising one-year fixed deposit rate downward was Commerz and Trust. Established around six years ago, the bank brought down the rate on the product for individuals to eight percent this month, from 11 percent on April 20, marking a reduction of 27 percent. Almost all other banks have also slashed rates on the most popular fixed deposit product by 0.5-1.75 percentage points. This has pulled down the rates on the product to single digit, as against the industrial average of 12 percent a year ago. With this reduction, interest rates on one-year fixed deposit now vary from as low as 3.5 percent extended by Standard Chartered Bank Nepal to up to nine percent offered by Civil Bank. Considering inflation of 9.9 percent in mid-June, it could be said depositors are not getting the return needed to compensate the rising consumer prices by parking money in banks for a year. The trend is the same in the case of savings deposit, with most of the banks reducing yields on these products by 0.25-1.5 percentage points. Savings rates now vary from two percent to up to 8.5 percent. The level of enthusiasm showed by bankers in reducing deposit rates, however, did not reflect on lending segment, with handful of banks reducing credit rates on auto, home, term and overdraft by up to two percentage points. Citizens Bank, for instance, slashed auto loan rates to 13-16 percent this month from 15-16.5 percent on May 16. It also brought down rates on home loans to a range of 13-15 percent from 15-16.5 percent. Mega Bank has also reduced interest rates on auto loans by up to two percentage points to a band of 12-14.5 percent and home loans by one percentage point to a range of 12-16 percent. Banks are offering auto loans for a lowest of 12 percent interest rate, while cheapest home loan can be fetched from NIC Bank for a low of 9.99 percent interest rate. In terms of corporate loans, such as, term loan, which is paid back in installment and is used by start-up businesses, interest rates came down by 0.25-1.5 percentage points. These rates, which were reduced by only nine banks, vary from 12-17 percent. Likewise, rates on revolving loans like overdraft, on which credit limit is set, came down by up to two percentage points to a range of 12-18 percent. Most of the bankers told Republica that they have not been able to reduce credit rates to a desirable level due to lack of demand for loans, which has compelled them to pay quite a significant amount on mountain of cash created due to liquidity surplus in the banking industry. But economists said this tendency of cutting deposit rates with higher margin, while bringing down lending rates marginally is hurting both depositors as well as borrowers. Nnnn ________________________________________

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