Nepali Village Byaj vs. Bank Fixed Deposit (FD): Simple, Compound & 5% TDS
Financial transactions in Nepal operate across two distinct credit spheres: regulated commercial banking with quarterly compounding deposits, and traditional informal village lending calculated on monthly percentage bases (such as Sayakada 2 or 3 rupees).
- Sayakada 2 equals 2% interest per month, totaling an annualized nominal rate of 24%.
- Sayakada 3 equals 3% interest per month, amounting to a steep annualized rate of 36%.
- Commercial bank Fixed Deposits compound quarterly and deduct a mandatory 5% withholding tax (TDS) on earned interest.
- Informal lending exceeding the statutory 16% ceiling violates the National Civil Code 2074.
Traditional Sayakada Rate Conversion to Annual Percentages
Informal promissory notes (Tamsuk) state interest per hundred rupees per month:
| Traditional Rate | Monthly Interest Rate | Annualized Nominal Rate | Annual Interest on NPR 1,00,000 |
|---|---|---|---|
| Sayakada 1 (सयकडा १) | 1% per month | 12% per year | NPR 12,000 |
| Sayakada 1.5 (सयकडा १.५) | 1.5% per month | 18% per year | NPR 18,000 |
| Sayakada 2 (सयकडा २) | 2% per month | 24% per year | NPR 24,000 |
| Sayakada 3 (सयकडा ३) | 3% per month | 36% per year | NPR 36,000 |
Bank Fixed Deposit Compounding and 5% TDS
Commercial banks in Nepal compute interest on daily product bases and compound balances quarterly. When crediting interest, banks deduct 5% withholding tax for individuals. If you earn NPR 100,000 in annual FD interest, the bank remits NPR 5,000 directly to the government revenue account and credits NPR 95,000 to your savings ledger.
Final Thoughts
Accurate interest calculations protect lenders and borrowers from mathematical discrepancies. Compute both traditional and banking interest using our Nepali Byaj Calculator.
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