The recent uptrend in the market was attributed to the interest rate adjustments made by commercial banks. The average base rate of commercial banks during the same period last year was 9.88% and the average interest spread rate was 4.16%. However, the current scenario is somewhat different.
Base rate, as defined by Nepal Rastra Bank, includes all cost of funds, cost of liquidity (CRR and SLR), and cost of operation. If a bank’s returns on government securities is lower than deposit collection rate, they can add the shortfall in the base rate.
This is the minimum rate banks have to charge their customers. Banks usually add a premium to the base rate to derive the total rate of interest on a particular type of loan facility. This makes the loan facility provided by different banks vary in the interest rate charged.
The latest base rate and spread rate of all commercial banks is as follows:
The average base rate of the industry stood at 9.50% and average spread rate stood at 5.07% as per the latest data available. With the lowest base rate (6.79%) and highest spread rate (5.96%), Rastriya Banijya Bank (RBB) leads in both aspects. Standard Chartered Bank (SCB) follows with base rate of 7.63% and Mega Bank (MEGA) with spread rate of 5.63%.
The highest base rates are charged by Civil Bank (11.11%), NCCB (10.74%) and Kumari Bank (10.62%). Similarly, the banks with lowest spread rates were Kumari Bank (3.78%), Nepal Bank Limited (4.47%) and CZBIL (4.58%).
The banks add a premium to the base rate to derive the interest on loan which differs from bank to bank. In case of margin lending, the range of premium added by each bank has been mentioned. The rate of premium for this type of loan can be anywhere between 0% and 8.50%. The average minimum margin lending rate stands at 10.20% while the average maximum margin lending rate stands at 14.77%.