Borrowers deserve a choice

Banks must not resist the central bank’s call to set fixed rates for term loans.

Nepal Rastra Bank and the commercial banks have had a testy relationship at times. The monetary policy of 2015-16 required these banks to raise their minimum paid-up capital from Rs2 billion to Rs8 billion. Nepal Rastra Bank sought to tempt the banks into mergers, resulting in fewer bigger banks. The banks instead bulked up by issuing rights and bonus shares. As of the last fiscal year ended mid-July, 27 commercial banks had a combined paid-up capital of Rs285 billion. The central bank routinely failed to intervene when these banks, in a cartel-like behaviour, capped deposit rates. As things stand, the regulator and the regulated are headed for another tug of war.