Commercial banks in Nepal have lowered their average base interest rate to 7.92% for the period between mid-August and mid-September. This marks a decrease of 0.25 percentage points from the previous months, driven by an excess of loanable funds. The reduction indicates that lending rates may also fall in the near future.
According to data from 20 commercial banks, Standard Chartered Bank has set the lowest base rate at 6.22%, followed by state-owned Rastriya Banijya Bank at 6.66%. On the higher end, NIC Asia Bank has the highest base rate at 9.22%, with Kumari Bank closely behind at 8.90%.
Over the past few months, banks have steadily decreased their interest rates, keeping the average base rate in single digits since May 2024.
A bank’s lending rate is determined by adding a premium to its base rate, typically ranging from 1.5% to 5%, depending on the type of loan and associated risks.
This reduction in base rates comes as Nepal faces an economic slowdown, increasing non-performing assets (NPAs), and challenges with capital adequacy ratios. However, banks have made improvements in key areas such as auto loans and loans secured by shares as collateral. Nepal Rastra Bank’s records show that banks have also reduced some of their NPAs while improving their capital adequacy.
As base rates continue to fall, businesses and individuals could benefit from lower lending rates and more affordable loans in the coming months.
