The base interest rate of commercial banks in Nepal has dropped to as low as 4.9% — the lowest in years — as excess liquidity and tepid credit demand weigh on the financial system. According to data from 20 commercial banks, the average base rate has now fallen to 6.2%, down from 6.48% just two months ago.
Leading the downward trend, Standard Chartered Bank Nepal and Rastriya Banijya Bank have pegged their base rates at 4.9% and 4.97%, respectively. In contrast, NIC Asia Bank has the highest base rate at 7.23%, reflecting variation in cost structures and loan strategies across institutions.
With loan disbursement lagging behind deposit collection, Nepal Rastra Bank (NRB) has stepped in, absorbing Rs 110 billion this week alone to mop up excess liquidity. As of Sunday, total deposits stand at Rs 6.286 trillion, while loans issued total Rs 4.952 trillion, placing the credit-to-deposit ratio at 78.18%, well below the 90% regulatory ceiling.
Despite lower lending rates — often just 1.5 to 5 percentage points above the base rate — banks remain cautious, curbing new loans due to rising non-performing assets and poor economic outlook. The result: cheap credit, but few takers.
This downward pressure on interest rates underscores a deeper structural issue: economic slowdown, weak credit demand, and rising defaults, all of which are straining the banks’ traditional profit engines.
