What is the latest base rate, Credit-Deposit Ratio and, Credit Adequacy Ratio of commercial banks? How Will It Impact The Market?

The base rate published by the commercial banks refers to the minimum rate below which they are not allowed to lend to the borrowers. The BFIs usually add a premium to the base rate in order to determine the base rate. The base rate includes:

• Cost of funds
• Cost of liquidity (CRR and SLR)
• Cost of operation

The industry average spread rate stands at 3.64% and the industry average base rate stands at 9.18% by the end of the third quarter of FY 78/79, whereas the same for FY 77/78 was 3.75% and 6.96% respectively. Compared to the average base rate of the previous quarter, the average base rate has considerably increased. The premium on base rate for margin lending could vary between 0% and 5% depending on the bank and the customer.

Out of 27 commercial banks, 15 Banks have base rates that are greater/equal to the average base rate. Sunrise Bank Leads the position by having the highest base rate of 10.11 followed by Mega Bank and Civil Bank. Whereas, Ratriya Banijya Bank and Standard Chartered Bank have the lowest base rate notwithstanding the fact that it is still high as compared to the Q3 of last year. The percentage of increase in base rates of the said bank is 24.76% and 29.40% respectively.

 The list of the latest base rate for each commercial bank is as follows:

Similarly, Capital Adequacy Ratio (CAR), also known as the Capital to Risk (Weighted) Assets Ratio (CAR), is the ratio of a bank’s capital to its risk.  In terms of CAR, Standard Chartered Bank Nepal Limited (SCB) seems to have reported the highest CAR of 15.9%. This is followed by Agriculture Development Bank Ltd (ADBL) with a CAR of 15.85%.

Likewise, Credit-Deposit Ratio (CD-Ratio) is the financial indicator that indicates how much a bank lends out of the deposits it has mobilized. Also, a very low CD Ratio indicates that banks are not making full use of their resources. Commercial banks have to maintain a CD ratio of a Maximum of 90 or below 90. However, most of the bank’s CD ratio is above 90. NRB has instructed commercial banks to bring down CD ratio below 90 from coming Ashad, 2079.

As of the third quarter of FY 2078/79, Prime Commercial Bank stands on top with a 99.62 CD Ratio, which is an increment of 17.38% since the last FY’s Q3.