Nepali commercial banks have lowered their base interest rates by an average of 0.21 percentage points due to sluggish loan demand in the ongoing economic slowdown.
According to financial reports, the base interest rate for mid-January to mid-February now averages 6.81%, down from 7.02% last month. Among the 20 commercial banks, three have set base rates below 6%, with Standard Chartered Bank offering the lowest at 5.19%, followed by Rastriya Banijya Bank (5.64%) and Everest Bank (5.66%). Meanwhile, NIC Asia Bank has the highest base rate at 7.75%.
Banks determine lending rates by adding a premium of 1.5% to 5% on top of the base rate, depending on loan risk factors. Despite declining interest rates, loan investments remain stagnant, with total commercial bank deposits reaching Rs 5.973 trillion while loans issued stand at Rs 4.799 trillion. The current credit-to-deposit ratio is 79.42%, well below the regulatory threshold of 90%.
With excess liquidity in the market, Nepal Rastra Bank (NRB) has absorbed Rs 1.270 trillion over the past three months through the standing deposit facility. Despite these measures, banks continue to struggle with loan portfolio expansion amid the economic downturn.
