KATHMANDU, March 24: Majority of commercial banks have lowered their base interest rates on loans to single digit after they were overwhelmed with excess loanable funds.

According to the financial reports unveiled by the class ‘A’ financial institutions, 17 out of 20 commercial banks have maintained their interest rates on loans below 10 percent per annum. Three commercial banks including Kumari Bank, Prime Commercial Bank and Himalayan Bank, however, are found reluctant to reduce their base interest rates to single digit. The base interest rate of Himalayan Bank is the highest at 10.10 percent per annum.

Standard Chartered Bank Nepal Limited (SCBNL) and Rastriya Banijya Bank (RBB) have fixed their base interest rates at less than 8 percent per annum. While the base rate on loans of the SCBNL is 7.52 percent that of the RBB is 7.62 percent.

The base rates of the remaining 12 commercial banks hover between 8.05 percent and 9.64 percent per annum. Nepal Rastra Bank (NRB) has permitted commercial banks to charge additional premium rates on the base rates depending on the risk factors of the nature of loans that the banks issued to their customers.

The notable drop in the interest rates has come after Nepal Rastra Bank (NRB) became lenient in the issue through the first review of the monetary policy for 2023/24 in the first week of December. The NRB reduced the bank rate from 7.5 percent to 7 percent, while the policy rate was also revised to 5.5 percent from 6.5 percent.

Citing the excessive deposit collections compared to the minimal loans that they issue to their customers, commercial banks have been lowering their interest rates on deposits since the past few months. At present, the interest rates on fixed deposits of most of the commercial banks are below 8 percent per annum.

Agriculture Development Bank has reduced its interest rates on fixed deposits to 5.66 percent per annum, which is the lowest among all. The average interest rate on saving deposits stands at around 3 percent per annum.

According to the NRB, commercial banks collected deposits worth Rs 5.474 trillion as of last Tuesday, while their total lending stood at Rs 4.495 trillion. The credit-deposit ratio stood at 79.73 percent, which was below the threshold of 80 percent set by the central bank. With the excessive liquidity in the banking system, the interbank interest rate has fallen to as low as 2.40 percent. 

 
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