KATHMANDU, Jan 16: Majority of commercial banks have reduced their base interest rate to single digit after having an excessive amount of loanable funds with them.

According to the financial statements unveiled by the banks, they have maintained average base rates at 9.69 percent. The base rate that has come into effect from Monday is 0.82 percent less for the next one month compared to the previous month.

Soaring deposit collection amid lackluster issuance of loans by banks has led to a decline in the lending rates. This has come as an aftermath of banks lowering their interest rates on deposit for the past few months.

Out of 20 commercial banks, 12 have maintained their base lending rates below 10 percent. Standard Chartered Bank Nepal Limited has kept its base rate at 7.77 percent, the lowest among all. Rastriya Banijya Bank and Everest Bank Limited have maintained their interest rates at 8.39 percent and 8.95 percent, respectively.

Eight commercial banks still have the base rates of more than 10 percent. Himalayan Bank Limited has kept its base rate at 10.77 percent, the largest of all.

The base lending rate of Kumari Bank Limited is 10.66 percent, which is followed by Laxmi Sunrise Bank with 10.62 percent, Prime Commercial Bank with 10.44 percent and NIC Asia Bank with 10.39 percent.  

According to bankers, the decline in the interest rate of banks has appeared also as an impact of Nepal Rastra Bank adopting flexible monetary policy. Through the first quarterly review, the central bank has reduced the policy rate from 6.5 percent to 5.5 percent and the bank rate from 7.5 percent to 7 percent.

Meanwhile, the banks and financial institutions (BFIs) issued subsidized loans worth Rs 242 billion to 140,115 individuals as of mid-December of the current fiscal year. The BFIs provided this type of loan under the interest subsidy scheme defined by the central bank in 10 different categories.

Out of the total subsidized loans, the largest amount was provided to agriculture and livestock credit. According to the NRB, 75,416 farmers took the largest amount of subsidized loans of Rs 154.39 billion in the segment, out of which Rs 2.86 billion was issued for collateral-free loans.   

Likewise, women entrepreneurs took subsidized loans of Rs 84.44 billion. Returnee migrant workers received a total loan of Rs 696.8 million under this heading.

 
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