Loan Interest Rates Slashed. But, By How Much?

Tue, May 23, 2023 12:35 PM on Latest,

The commercial banks in Nepal have slashed the interest rates on loans effective from Jestha.

The decision to cut down the interest loan has come expectedly following the earlier directive of the Nepal Rastra Bank (NRB) allowing to adjust loan interests on a monthly basis. The directive has been a subject of major relief for the debtors, as they would have had to wait until Shrawan 1 to pay reduced loan interests, if not for the same.

The interest rate of loans in commercial banks have decreased by 0.21% since Jestha.

According to the statistics of Nepal Bankers' Association (NBA), the interest rate of new loans since Jestha has been cut down by 0.21% while for old loans it has been slashed by 0.13%.

The average base rate for the past three months (Falgun, Chaitra and Baisakh) is at 10.64 % compared to the average base rate of 10.59% collectively for months of Magh, Falgun and Chaitra.

Meanwhile, the interest rate on saving deposits have remained stable.

READ HERE: Banks and Financial Institutions Reduce Interest Rates for Baisakh

The base rate is decreasing, on the other hand, there is the provision of maintaining 4% difference (spread rate) between loan and deposit until Ashad, following which the interest rates on loan is gradually declining, as stated by NBA representative in a press release held on Monday.

The interest rates on loan are expected to further decline in the coming months, added NBA representative, after which it is being speculated that it could reach as low as it was during COVID-19 period.  

Similarly, it was also informed that since Shrawan, 2079 to Jestha 2, 2080 3.10 Kharba have been collected as deposits in the bank while in the same period 1.22 Kharba has disbursed as loans.

Although the ongoing liquidity crisis has improved to some extend in the past few months the banks have not been able to hand out loans impressively.