Kathmandu. Fixed accounts, which have long been a symbol of ‘fixed income’, have started to decrease attractively. The proportion of fixed deposits in banks and financial institutions has been steadily declining over the past few years. This change shows the new trend in the banking system.
According to nepal rastra bank data, the total deposits have reached Rs 6.969 trillion as of Mid-June 2082. However, the share of fixed deposits has come down to 50.2 per cent. This is a significant decline from 58.5 percent in the previous year. A few years ago, the share was growing—48.5 percent in 2078, 57.1 percent in 2079, and 59.8 percent in 2080.
The share of fixed deposits, which was on an increasing trend in the past, has decreased in recent years. Experts say that the main reason for this decline is the continuous fall in the interest rate on fixed deposits. Interest rates, which used to reach double digits in previous years, are now limited to single digits in most banks. At the same time, bankers have also started saying that liquidity is sufficient now and there is a need to focus on current and savings accounts instead of fixed deposits.
In recent times, citizens have started moving their capital to other investment channels such as stock markets, mutual funds by breaking their fixed accounts. Once the credit investment in the stock market becomes easier, it seems more practical for investors to invest in a return zone than to deposit money in a fixed account.
Experts say that although the share of fixed deposits is decreasing now, there is no need to worry. Although money has been withdrawn from the term account now, it is returning to the banking system through other means. As a result, the banking system has not felt much pressure.
However, large institutional depositors such as insurance companies, employees provident fund, citizen investment fund, social security fund are still stuck in fixed accounts. Although interest rates have come down, they have again started focusing on fixed deposits after the return on short-term instruments such as the Treasury decreased. However, they are also choosing only a maximum period of one year. However, the attraction towards long-term issues has decreased.
Current and savings accounts are still a reliable means for the class who want to save daily income and save little capital. The share of savings accounts in the banking system has reached 36.2 percent as of Mid-June 2018. Which is the fastest growth rate compared to 29.1 percent in the previous year. This means that citizens are moving towards a way to keep even small amounts of money moving.
Looking at the data from 2075 to 2082, there has been a significant change in the tendency of Nepali citizens to save. The share of savings accounts declined from 34.5 per cent in 2075 to 25.6 per cent in 2080. However, in 2082, it increased sharply to 36.2 percent.
Similarly, the share of fixed deposits declined from 45.7 per cent in 2075 to the highest of 59.8 per cent in 2080 to 50.2 per cent in 2082. However, the share of current accounts is gradually declining. Which is limited to 5-6 percent.
This shows the change in citizens’ investment preferences and risk-bearing thinking. On the one hand, the attraction towards short-term but dynamic savings has increased, while on the other hand, there is a growing disinterest in long-term fixed savings.
The fall in fixed deposits is not only an effect of interest rates, it is also an indication of the changing financial consciousness and risk-taking capacity of the common man. This is not only a challenge but also an opportunity for banks to develop new savings products and attractive investment options, experts point out. Therefore, experts insist that they should work according to the new strategy.
