Why have FD interest rates fallen so much in Nepal?

Rates fell because the whole price of money fell. In the 2079/80 liquidity crunch banks were short of deposits and pushed individual FD rates to 11–12% to attract them. Since then remittances have flooded deposits in, loan demand has stayed weak, and banks are sitting on excess cash they cannot lend. NRB also cut its policy rates through FY 2082/83. With too much money chasing too few borrowers, banks no longer need to pay high rates, so FD rates have settled around 5–7%.

What is the NRB interest rate corridor?

It is the band NRB uses to steer short-term interest rates, set by three rates. The lower bound is the deposit collection rate (the Standing Deposit Facility), currently 2.75%. The upper bound is the bank rate (the Standing Liquidity Facility), cut to 5.75% in the December 2025 review. The policy repo rate sits in the middle at 4.25%. When NRB moves these, deposit and lending rates across the system drift with them.

Do banks set their own FD rates or does NRB fix them?

Banks set their own deposit rates and republish them every Nepali month. Until mid-2023 the Nepal Bankers' Association fixed rates collectively under a gentlemen's agreement; that ended, and banks now price individually. NRB still imposes guardrails: the spread between average lending and deposit rates is capped at 4.0% for commercial banks, the gap between the highest individual FD and lowest savings rate is capped at 5 points, and month-to-month rate moves are limited.

What FD rates are Nepali banks paying now?

As of late 2082 (late 2025), most commercial banks offer individual fixed-deposit rates roughly in the 5–7% range depending on tenure and customer type, with some banks topping out around 6.5%. These are sharply down from the 11–12% peak of early 2023. Because banks re-price monthly and the rate environment is still easing, check the current rate sheet before locking a deposit.

Should I lock a long FD now or wait for rates to rise?

Nobody can time it precisely, but the current stance is expansionary and rates have been falling, not rising. Locking a longer FD now secures today's rate if rates keep dropping, but strands you below market if they climb. The standard hedge is an FD ladder: split the money across staggered maturities so a rung reprices each year, which protects you in both directions rather than betting on one.

Why FD Rates Change in Nepal: Base Rate & NRB Corridor

Q: What is a bank's base rate in Nepal?

The base rate is the floor below which a bank cannot lend. NRB sets the formula: base rate = cost of funds + cost of the cash reserve ratio + cost of the statutory liquidity ratio + operating cost. The bank then adds a premium on top to set your actual loan rate. As of end-Ashwin 2082 the average commercial-bank base rate had fallen to about 5.60%, down from 7.35% a year earlier, with the lowest banks near 4.3%.

A reader's five-year fixed deposit matured last Asar. He had locked it in 2080 at 11%, a rate that looked ordinary at the time. The renewal offer from the same bank, same branch, same product: a little under 6%. He assumed it was a mistake, or that the bank was quietly squeezing him. It was neither. The price of money in Nepal had nearly halved in those years, and his 11% was the artefact of a liquidity crunch, not the norm. The 6% was the new reality.

FD rates are not a number the bank invents to suit itself. They sit on top of two mechanisms that move with the wider economy: a formula called the base rate, and a band run by NRB called the interest-rate corridor. Understand those two and the swings stop looking arbitrary.

The base rate: the floor a bank lends above

Every commercial bank in Nepal publishes a base rate, and NRB fixes how it's calculated. It is the bank's own cost of doing business expressed as a percentage, the level below which lending would lose money.

The formula has four parts:

Base rate = cost of funds + cost of CRR + cost of SLR + operating cost

Cost of funds is the weighted average rate the bank pays on its deposits, debentures, and borrowings. This is the big one, and it's why deposit rates and lending rates move together.
Cost of CRR reflects the cash reserve ratio (currently 4%) the bank must park at NRB earning nothing.
Cost of SLR reflects the statutory liquidity ratio (around 12% for commercial banks) held in low-yield government securities.
Operating cost is the bank's running expenses spread across its lending book.

The bank then adds a premium on top of the base rate to arrive at your loan rate. So a home loan is "base rate + a few points," which is exactly why a falling base rate pulls floating home-loan rates down with it. As of end-Ashwin 2082 the average commercial-bank base rate had dropped to about 5.60%, from 7.35% a year earlier. The spread between banks is wide: Standard Chartered sat near 4.27% and Rastriya Banijya Bank near 4.54%, while NIC Asia was the highest among the large banks at about 6.60%. Through early 2083 the slide continued, with the lowest published base rates dipping further, toward 4.2%.

The cost-of-funds link is the key insight. When deposit rates fall, the base rate falls, loan rates fall, and the bank's incentive to pay high deposit rates falls again. The whole structure moves as one.

The corridor: how NRB steers the price of money

The base rate is the bank's cost. The corridor is NRB's steering wheel. It is a band, set by three policy rates, that keeps very short-term interest rates from wandering too far.

For FY 2082/83, after the December 2025 first-quarter review:

Corridor rate	What it is	Level
Bank rate (Standing Liquidity Facility)	Upper bound: what NRB charges to lend to banks	5.75%
Policy repo rate	The central signal rate, mid-corridor	4.25%
Deposit collection rate (Standing Deposit Facility)	Lower bound: what NRB pays to absorb bank cash	2.75%

These are not the rates you get, but everything you get hangs off them. When a bank has surplus cash it can't lend, it can park it at NRB and earn the 2.75% floor, so it won't pay you much more than that on idle savings. When it's short of cash it can borrow from NRB at the 5.75% ceiling, which caps how high interbank rates climb. Your savings and FD rates live inside the band these three rates define.

The corridor also illustrates the "keep changing" part directly. NRB announced FY 2082/83 in July 2025 with the repo at 4.5% and the ceiling at 6.0%, then cut both in the December review to 4.25% and 5.75%. A mid-year trim like that ripples straight through to deposit rates within a month or two. The exact same 2.75% floor and 6.0% ceiling were what set the band the FD ladder post described earlier in the year; the December cut is why the ceiling reads 5.75% now.

Who actually sets your FD rate

A common assumption is that NRB dictates FD rates. It doesn't. Banks set their own deposit rates and republish them at the start of each Nepali month.

This wasn't always so. Until mid-2023 the Nepal Bankers' Association fixed deposit rates collectively, a practice critics called a cartel dressed up as a "gentlemen's agreement." From the start of FY 2080/81 the association ended it, and class-A banks began publishing rates individually. That's why you now see real differences between banks on the same tenure, and why shopping the rate sheet is worth doing.

NRB doesn't fix the rate, but it fences it in:

The spread between a bank's average lending rate and average deposit rate is capped at 4.0% for commercial banks (4.6% for development banks and finance companies), tightened from the old 4.4% and 5.0% caps in late 2022. Breach it and NRB writes letters and takes action; it has penalised banks over spread management.
The gap between the highest individual FD rate and the lowest savings rate at a bank is capped at 5 percentage points.
Banks can only move deposit rates by a limited amount month to month, so rates drift rather than jump.
In the December 2025 review NRB scrapped the old rule that institutional FD rates had to sit at least 1 point below individual rates, giving banks more flexibility on who they reward.

These guardrails are why all banks' rates cluster in a narrow band even when they price individually. How that affects the savings end specifically, including why ordinary savings sits near the floor, is in how savings interest is calculated.

Why rates fell: too much money, too few borrowers

The structure explains how rates are set. The recent direction, the fall from double digits to 5–7%, comes down to supply and demand for money.

In the 2079/80 crunch, banks were genuinely short of deposits relative to the loans they wanted to make. The credit-to-deposit (CD) ratio, capped by NRB at 90%, was pressed against the ceiling, so banks competed hard for deposits and pushed individual FD rates to 11–12%. In January 2023, banks were still cutting from 12% to 11%, with lending rates near 11.5% and base rates above 9%.

The picture then flipped:

Remittances poured in. Steady inflows from Nepalis abroad swelled bank deposits without any effort on the banks' part. As one banker put it, the system was "swimming in liquidity, but demand wasn't there."
Loan demand stayed weak. Businesses weren't borrowing, so banks couldn't deploy the deposits. CD ratios fell well below the 90% cap, and banks parked hundreds of billions of unused rupees at NRB.
NRB eased. With inflation contained, the policy stance turned expansionary, cutting the corridor rates to encourage lending.

With deposits abundant and borrowers scarce, a bank has no reason to pay you 11% for money it can't lend out. So FD rates fell to where they are. The mirror image of the crunch that created the 11% in the first place.

This also reframes the 13% cooperative FD: when licensed banks pay 6%, a 13% headline is not a better rate, it's a signal of where the institution sits on the risk ladder and how badly it needs your deposit.

What it means for your money

Three practical consequences flow from all this.

First, the rate on your FD is a snapshot of one moment in the cycle, not a permanent feature. Locking a long FD is a bet on the direction of rates. Lock five years at 6% and you win if rates keep falling, and you're stranded if they climb back toward the 2080 highs. Since nobody reliably times this, the FD ladder is the standard answer: stagger maturities so a rung reprices every year and you're protected in both directions.

Second, falling deposit rates and falling loan rates arrive together. The same easing that cut your FD to 6% also cut home-loan rates, so a saver and a borrower in the same household feel it in opposite directions. If you carry a floating loan, a falling base rate is quietly working in your favour.

Third, real returns get thin at the bottom of the cycle. With FD rates near 5–7% and the 6% TDS taken off the top, the post-tax return barely clears inflation. That's the cycle telling you to look past deposits for money you won't need for years, while keeping FDs for the safe, near-term cash where capital protection matters more than yield.

What you actually need to know

Two mechanisms set the price of money. The base rate (cost of funds + CRR + SLR + operating cost) is the floor a bank lends above, and NRB's corridor (2.75% floor, 5.75% ceiling, 4.25% repo) steers short rates. Your FD and savings rates live inside that structure.
Banks set FD rates, NRB fences them. Banks price individually and republish monthly, inside a 4.0% spread cap and a 5-point FD-to-savings gap. That's why rates cluster but still differ enough to shop.
The fall was liquidity, not generosity withdrawn. Remittance inflows plus weak loan demand left banks awash in cash they can't lend, so FDs fell from 11–12% to 5–7%. Ladder rather than guess the next turn, and look past deposits for long-horizon money.

Trying to decide whether to lock a long FD at today's rate or ladder it? Email parjanya57@gmail.com with the amount and your timeline, and I'll work through the rate-direction trade-off with you.

This post is part of the Nepal Money Basics guide — the saving section.