Banks are amassing large investable cash in the system but due to stalled credit demand, they are also compelled to lower deposit rates. This has led to falling base rates, in turn, lowering interest on loans.
This year, the average base rate of the ‘A’ class Commercial banks dropped by 7.34% at the end of the first quarter.
Two banks which have the lowest base rate are: Standard Chartered Bank (5.71%) and Rastriya Banijya Bank (6.05%) which indicates their relatively low cost funding structure.
| What is a base rate?
→ Base rate is the minimum rate of interest on which banks can issue loans. BFIs aren’t allowed to lend below this rate, as prescribed by their regulator NRB. Banks determine their base rate taking various financial variables into account such as cost of their funds, their operating cost and cost of their cash reserve ratio, among others. |
A decrease in base rate means banks can offer loans at cheaper rates. Banks add a certain premium on their base rate while lending based on the nature of the loan and associated risk factors. The Nepal Rastra Bank allows banks to provide loans by adding a premium of up to 5% on the base rate. In priority sectors, they can charge a premium of up to 2%.
Reportedly, banks have started providing loans by adding a minimum premium of 0.25% while corporate borrowers are even being offered loans at the base rate itself.
Table 1: List of ‘A’ class Commercial Banks with their 2024/25 Quarter End Base Rate
| Name of Banks | Base Rate |
| Standard Chartered Bank (SCB) | 5.71% |
| Rastriya Banijya Bank (RBB) | 6.05% |
| Nepal Bank | 6.72% |
| Everest Bank | 6.80% |
| Nabil Bank | 7.02% |
| Agriculture Development Bank (ADB) | 7.07% |
| Nepal Investment Mega Bank | 7.08% |
| Sanima Bank | 7.24% |
| Global IME Bank | 7.29% |
| Kumari Bank | 7.48% |
| NMB Bank | 7.49% |
| Siddhartha Bank | 7.58% |
| Machhapuchchhre Bank | 7.61% |
| Prabhu Bank | 7.65% |
| Nepal SBI Bank | 7.72% |
| Laxmi-Sunrise Bank | 7.79% |
| Citizens Bank | 7.92% |
| Prime Commercial Bank | 7.92% |
| Himalayan Bank | 8.35% |
| NIC Asia Bank | 8.37% |
| Average | 7.34% |
