Previously, banks and financial institutions were required to keep the interest rate on institutional term deposits at least 1 percentage point lower than the interest rate on individual term deposits.
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Now, banks and financial institutions will be able to offer higher interest rates on deposits to institutional savers, just like they would to ordinary savers.
The National Bank has made this provision through the first quarterly review of monetary policy . Earlier, there was a provision that banks and financial institutions should keep the interest rate on institutional term deposits at least 1 percentage point lower than the interest rate on individual term deposits .
At a time when there is excess liquidity in the financial system, interest rates are the weakest in history, and there is no demand for credit, banks and financial institutions have been paying very low interest on term deposits to institutions . This is why institutional depositors were hit when their interest income decreased . Now, the National Bank has repealed the provision .
‘The existing provision that banks and financial institutions should lower the interest rate on institutional term deposits by at least 1 percentage point than the interest rate on individual term deposits will be repealed,’ the National Bank has said .
