KATHMANDU, Sept 7: Commercial banks have reduced the base interest rate at an average of 7.92 percent for this month (mid-August and mid-September) after they are left with excessive loanable funds.
The reports unveiled by the banks show that they have reduced the base interest rate by 0.25 percentage point for the ongoing month, compared to the previous months. With the reduction in base rate, banks are likely to reduce their lending rate in the near future.
Revised interest rate corridor system introduced
Of the 20 commercial banks, Standard Chartered Bank has maintained the base rate at the lowest of 6.22 percent. The state-owned Rastriya Banijya Bank, with its base rate of 6.66 percent, stands at second position.
Likewise, NIC Asia Bank maintains the base rate at 9.22 percent, the biggest of all. Kumari Bank’s base rate is 8.90 percent.
In the past few months, banks have been successively lowering their interest rates. Since May 2024, banks have been maintaining their average base rate at a single-digit.
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 percent and 5 percent on top of the base rate when they provide loans to their clients.
The ongoing economic slowdown, increased non-performing assets of banks and issues related to capital adequacy ratio, among others, mainly affected banks’ lending in recent days. The banks however are reported to have increased their lending in auto loans and credit against the share in collateral. Likewise, they have also reduced a portion of their non-performing loans, while they have also improved in their capital adequacy position, shows the records with Nepal Rastra Bank.
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