Commercial banks have reduced their base interest rates by an average of 0.19 percentage points for the period between mid-February and mid-March. The move aims to attract borrowers as banks struggle to increase their lending.
With the latest revision, the average base interest rate now stands at 6.61 percent, down from 6.81 percent a month ago. This follows a similar reduction of 0.21 percentage points last month.
Reports from 20 commercial banks indicate that all of them have lowered their base interest rates for the ongoing month. Standard Chartered Bank Nepal has the lowest base rate at 5.19 percent, followed by Rastriya Banijya Bank (5.44 percent) and Everest Bank (5.63 percent).
A bank’s lending rate is determined by adding a certain premium to its base rate, typically ranging between 1.5 percent and 5 percent, depending on the nature of the loan and associated risks.
Among commercial banks, NIC Asia Bank has the highest base interest rate at 7.53 percent, followed by Prime Bank (7.16 percent), Laxmi Sunrise Bank (7.13 percent), and Kumari Bank (7.12 percent).
According to Nepal Rastra Bank, as of last Monday, commercial banks had collected deposits worth Rs 5.993 trillion while lending Rs 4.832 trillion. Compared to the previous day, deposit collection saw a slight decline, while lending increased marginally. The credit-to-deposit ratio stood at 79.69 percent, significantly lower than the regulatory threshold of 90 percent.
Despite a minor improvement in lending, Nepal’s banking system still holds over Rs 700 billion in excess loanable funds. Bankers attribute the slow growth in lending to the ongoing economic downturn and weakened investor confidence.
For over a year, Nepali commercial banks have been gradually lowering interest rates to attract borrowers. Since May 2024, they have maintained their average base rate in single digits.
