May 13: Nepal Rastra Bank (NRB) has directed the banks and financial institutions (BFIs) not to approve fixed deposits of less than three months.
The central bank informed the BFIs about this decision in a circular issued on Sunday, May 12. The financial market regulator had not set any minimum duration for fixed deposits (FD) before.
Previously, many BFIs were accepting fixed deposits for a period as short as a month.
The central bank imposed the restriction on such FD schemes after the BFIs were found to have accepted FDs even for just three days.
The depositors cannot withdraw the amount from their fixed deposit accounts before the term expires even if they are willing to pay the interest rate, reads the circular issued by the central bank.
Until now, the depositors were allowed to withdraw a certain amount from their fixed deposit accounts by paying a certain amount as fines. But the new directive of the central bank does not allow this.
However, a CEO on the condition of anonymity told New Business Age that the central bank has not restricted them from issuing fresh loans to the depositors by keeping their fixed deposits as collateral.