KATHMANDU, April 3: The average base interest rate of Nepal’s commercial banks has come down to a three-year low at 6.48 percent as the banks have been unable to issue loans by notable amounts.
According to the statistics unveiled by the 20 commercial banks, they reduced the base interest rate by 0.15 percentage point for the month between mid-March and mid-April. In the previous month the average base rate was 6.63 percent.
A bank’s lending rate is determined by adding a certain premium rate to its base rate. Based on the nature of lending and risk factors, banks add a premium between 1.5 percentage points and 5 percentage points on top of the base rate when they provide loans to their clients.
Revised interest rate corridor system introduced
Regarding the individual banks, the base rate of Standard Chartered Bank Nepal stands at 5.03 percent, the lowest of all. Rastriya Banijya Bank, Everest Bank and Nepal Bank Limited have also maintained their base rates below six percent--5.28 percent, 5.46 percent and 5.96 percent, respectively.
NIC Asia Bank has the highest base rate of 7.41 percent, followed by Prime Bank with its base rate at seven percent. Among the state-owned banks, the base rate of Agriculture Development Bank stands at 6.52 percent, the largest in the segment. The figure stands between six and seven percent for the remaining 14 commercial banks.
Since May 2024, banks have been maintaining their average base rate in single digits. Despite a notable decline in the lending rates, banks have been unable to expand their loan portfolio due to the ongoing economic slowdown.
The records with Nepal Rastra Bank (NRB) show that the commercial banks as of Monday collected deposits of Rs 6.060 trillion, and issued loans worth Rs 4.853 trillion. The credit to deposit ratio of the banks stood at 79.31 percent, compared to the regulatory threshold of 90 percent. Despite the nominal improvement in the lending portfolio, Nepal’s banking system still has excessive loanable funds of over Rs 700 billion, according to bankers.