Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal’s commercial banks’ average base rate has declined to 5.94 percent, signaling a period of cheaper borrowing as interest rates continue to fall across the banking system. The drop comes as deposit rates fall and loan demand remains sluggish, leading to excess liquidity and forcing banks to lower both deposit and lending rates aggressively.
According to the latest data, the average deposit interest rate has come down to 4.02 percent, reducing banks’ cost of funds and contributing directly to the decline in base rates. Over the past two years, as deposit rates have continuously decreased, the base rate—used as the benchmark for loan pricing—has also dropped, making loans significantly more affordable for both existing and new borrowers.
In Ashoj 2082, two commercial banks reported base rates below 5 percent: Standard Chartered Bank Nepal at 4.60 percent, the lowest in the market, and Rastriya Banijya Bank (RBB) at 4.72 percent.Similarly, eight other banks—including Everest, Nepal, Global IME, Krishi, Nabil, Nepal Investment Mega, Sanima, and Machhapuchhre Bank—have maintained base rates between 5 and 6 percent.
Ten commercial banks currently have base rates ranging between 6 and 7 percent, with NIC Asia Bank posting the highest at 6.91 percent.
Bank CEOs attribute the drop to the lack of credit demand and the accumulation of loanable funds within the system. Sanima Bank CEO Nischal Raj Pandey said that interest rates are driven by supply and demand. “Loan demand has not increased, so rates have naturally come down. When deposit rates drop, it directly affects lending rates. This is good news for borrowers struggling with loan repayments,” he said.
A lower base rate translates directly into cheaper loans, as banks typically add a premium of 0.25 to 5 percent above the base rate when determining lending rates. However, with loan growth stagnating, banks are now offering loans with minimal premiums—around 0.25 percent—to attract borrowers.
The trend has also made home and auto loans significantly cheaper. Nepal Bank Limited is now offering such loans at an interest rate of 5.99 percent, while most other banks are offering similar products in the 6 to 7 percent range.
According to the latest figures, the average lending rate across commercial banks now stands at 7.76 percent, the lowest in years.
Below is the comparative data of major commercial banks’ base rates over the past three years:
The consistent decline in base and lending rates reflects a highly liquid banking environment, with excess funds seeking productive investment avenues. Analysts say the trend could stimulate private sector borrowing if business confidence and economic activities begin to pick up in the coming quarters.
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