Average interest of commercial banks drops by 2.50 percent

KATHMANDU, MARCH 11: The weighted average interest rate on loans issued by commercial banks has declined by 2.53 percent. According to data published by Nepal Rastra Bank, the lending rate of commercial banks stood at 8.55 percent in the last Nepali month of Magh (mid-January to mid-February). In the same month of the previous fiscal year, it was 11.08 percent.

Similarly, the weighted average lending rate for development banks was recorded at 9.90 percent in the review month this year, while finance companies had a rate of 10.88 percent. In the same month last year, these rates stood at 12.85 percent and 13.93 percent, respectively. The significant reduction in the average base rate has contributed to the overall decline in lending rates across the banking sector.

Currently, the average base rate of commercial banks has dropped to 6.46 percent, down from 9.06 percent in the Nepali month of Ashwin (mid-September to mid-October) last year. Due to high liquidity in the banking system, banks have also lowered the premium they add when setting lending rates. Previously, banks would charge a premium of up to 5 percent in times of liquidity shortages, whereas they are now offering loans with an additional premium of just 1 to 1.5 percent.

In Magh this fiscal, the average base rate for development banks stood at 8.52 percent, while finance companies recorded a rate of 9.39 percent. During the same month last fiscal. these figures were 11.13 percent and 12.70 percent, respectively.

The weighted average interest rate on deposits in commercial banks stood at 4.62 percent in the review month, while development banks and finance companies recorded rates of 5.41 percent and 6.47 percent, respectively. In comparison, in the corresponding month last year, deposit interest rates were 7.01 percent for commercial banks, 8.26 percent for development banks, and 9.45 percent for finance companies.

Meanwhile, the weighted average interest rate on 91-day treasury bills declined from 3.34 percent in Magh last year to 2.86 percent in the same month this year. The weighted average interbank lending rate among banks and financial institutions also saw a slight decrease, from 3.04 percent to 3.00 percent over the same period.