Weighted Average Deposit Rate at 4.02%: Is It Attractive Enough for Savers?

Published on September 23, 2025

As of Saun End, 2082 (Mid-August 2025), Nepal’s banking sector reports a weighted average deposit rate of 4.02%. Breaking this down, savings deposits carry an average rate of 3.07%, fixed deposits stand at 5.33%, and call deposits at just 1.04%. These figures raise an important question: are current deposit rates attractive enough to sustain savers’ confidence, particularly in an economy facing inflationary pressures and alternative investment opportunities?

On one side, a 4% deposit rate provides stability and guaranteed returns, especially compared to riskier assets such as equities or real estate. For conservative households, this remains a safe option, particularly given the strong trust in Nepal’s banking system, with deposits now exceeding 118% of GDP. The dominance of fixed deposits (48.14% of total deposits) suggests that savers still prefer locking in funds for slightly higher returns, signaling confidence in formal banking channels.

On the other hand, deposit rates are losing competitiveness when compared to rising living costs. If inflation hovers above the deposit rate, real returns for savers turn negative, eroding purchasing power. This could push households toward alternative savings instruments, cooperatives, or even informal lending markets, where higher returns are promised despite higher risks.

For banks, lower deposit rates ease funding costs and improve profitability, especially when paired with a weighted average lending rate of 7.76%, ensuring a spread of around 3.7%. However, if deposit rates remain unattractive in real terms, sustaining long-term deposit growth may become difficult, creating funding challenges for future credit expansion.

In broader terms, the current rates reflect a balancing act between encouraging deposits, managing liquidity, and maintaining profitability. While they are adequate for now, ensuring depositors feel rewarded will be critical in preserving trust and avoiding a shift toward non-bank alternatives.

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