Status of Base Rates and Loan Interest Rates in Banks

Various banks in Nepal determine the interest rates on loans based on their base rates. Recently, the base rates have been declining, leading many banks to offer loans at single-digit interest rates.

Key Highlights of the News:

Status of Base Rates:

• The base rates of banks have currently dropped to as low as 6%.

• Loans are now available at single-digit interest rates from almost all banks.

Base Rates of Various Banks:

Premium and Loan Disbursement:

• Banks can add a premium of up to 5% on the base rate when issuing loans.

• Currently, due to high liquidity, banks are offering loans with minimal premiums.

What is the Base Rate?

• The base rate is the primary benchmark for determining the interest rates on loans offered by banks.

• Banks can add a premium of 0% to 5% on the base rate to set the final interest rate.

Reasons and Impact of Declining Base Rates:

• A declining base rate means that banks are offering loans at lower interest rates, making it easier to obtain loans.

• Due to high liquidity and a large amount of investable funds, banks are providing loans with lower premiums.