Commercial banks have experienced a decline in their weighted average interest rate on loans. According to the latest report by Nepal Rastra Bank (NRB), the average interest rate on loans for commercial banks in the month of Magh (mid-January to mid-February) stood at 8.55 percent, a drop from 11.08 percent in the same month of the previous fiscal year.
Similarly, the weighted average interest rates on loans for development banks and finance companies during the review period were 9.90 percent and 10.88 percent, respectively. In the corresponding period last fiscal year, these rates were 12.85 percent for development banks and 13.93 percent for finance companies. The significant reduction in loan interest rates is attributed to the decline in the average base rate.
The average base rate of commercial banks has now fallen to 6.46 percent, down from 9.06 percent in Asoj (mid-September to mid-October). Due to increased liquidity in banks, financial institutions have also reduced the premium rate added when determining loan interest rates.
Previously, banks added a premium of up to 5 percentage points when liquidity was low. However, with higher liquidity, banks are now offering loans with a reduced premium of just 1.5 percentage points.
