By Ajay Chhetri, Kathmandu, Nov 30: Inflation and cost of the loanable fund remained low in the FY 2020/21. The annual report of Nepal Rastra Bank (NRB) showed that average inflation in the FY 2020/21 remained at 3.60 per cent down from 6.15 per cent a year earlier.  Also, the average interest on loan remained at 8.43 per cent down from 10.11 per cent a year earlier.

The report showed that average inflation in food and beverage and non-food and service remained at 5 per cent and 2.51 per cent respectively. The inflation recorded 8.16 per cent and 4.61 per cent a year earlier.

In the review year, average consumer inflation in the mountain, hill recorded 3.87 per cent, 2.87 per cent and 3.33 per cent in Kathmandu valley, 3.68 per cent in Terai. The recorded average consumer inflation remained 5.10 in the hill, 4.91 per cent in the mountain, 6.96 per cent in Kathmandu, 6.29 per cent in terai a year earlier.

The report showed that the weighted average interest rate on loan recorded 8.43 per cent in the FY 2020/21 down from 10.11 per cent a year earlier. The loan and advances of commercial banks increased by 27.7 per cent (Rs 952.09 billion) to Rs 4397.96 billion in the review year. A year earlier, the loan and advances had increased by 19.1 per cent ( Rs 550.92 billion).

Loanable interest, however, in the first quarter again began rising. First-quarter recorded 8.69 per cent weight average interest rate from 8.43 per cent in the previous FY. Similarly, the interbank-interest rate spiked up to 4.97 per cent in the end of November from 0.11 per cent a year earlier.

According to the spokesperson of the NRB Narayan Prasad Pokhrel, the main reason for the rising of the interbank interest rate despite the excess liquidity is the uneven availability of liquidity among bank and financial institutions (BFIs). Some of the BFIs have high liquidity and some have very low liquidity availability. So this caused hindrance in the availability of loan fund with some of the BFIs.