The base rates of banks has increased in the third quarter of the current Fiscal Year. Compared to the first nine months of the last fiscal year, the average base rate of banks has exceeded 9 percent in the first nine months of the current Fiscal Year.
As of mid-April last year, the average base rate of 27 commercial banks was 6.90 percent, but by mid-April this year, it has increased to 9.09 percent. That is, the interest rate on loans has gone up.
The base rate is the rate calculated by incorporating clearly identifiable elements in determining the interest rate of the loan. In order to make the interest rate determination of loans of banks and financial institutions competitive and transparent, it was mentioned that the base rate system will be implemented for the first time in the Fiscal Year 2069/70.
The base rate was introduced in commercial banks in 2069 BS and only one year later in 2070 BS in development banks and finance companies. In which the interest rate is determined by adding the risk premium of the loan and this applies equally to the borrowers consuming the loan from the bank.
However, the base rate is not the actual interest rate of the loan. This is just the basis for determining interest rates. Which can also be called interest rate reference rate. That is, banks should fix the interest rate with the base rate as the reference rate.
Banks are now setting interest rates by adding a certain percentage to their base rate. In general, when the base rate decreases, the interest rate on banking loans decreases. But it also gives banks space to play. Banks can add a few percent premium to the base rate depending on the customer.
