Base rate of 21 banks above 10pc

Kathmandu, August 16

Though banks have made marginal adjustments to the base rate published at the end of the last quarter of the previous fiscal 2017-18, 21 commercial banks have maintained their base rate in double digits.

Century Commercial Bank has maintained the highest base rate in the industry at 12.08 per cent, followed by Nepal Credit and Commerce Bank (11.92 per cent), Civil Bank (11.84 per cent) and Agricultural Development Bank (11.73 per cent).

The base rate of 11 banks stands at above 11 per cent. Apart from the aforementioned four banks, Kumari Bank, Nepal Bangladesh Bank, Janata Bank, Laxmi Bank, Sunrise Bank, Mega Bank, Siddhartha Bank and Machhapuchchhre Bank have maintained base rate of above 11 per cent.

Meanwhile, nine banks have maintained a base rate in between 10 and 11 per cent, namely, NIC Bank (10.78 per cent), Citizens Bank (10.72 per cent), NMB Bank (10.7 per cent), Bank of Kathmandu (10.67 per cent), Prabhu Bank (10.62 per cent), Global IME Bank (10.55 per cent), Prime Commercial Bank (10.47 per cent), Sanima Bank (10.27 per cent) and Nepal SBI Bank (10.12 per cent), as per the base rate published at the end of the fourth quarter of the previous fiscal.

Commercial banks publish the base rate every quarter and make adjustments in the lending rates based on the variation in the base rate.

As the base rate of 21 banks is above 10 per cent, there are slim chances of the lending rates coming down to the ideal level as envisioned by Nepal Rastra Bank.

The base rate is calculated on the basis of expenses incurred by the banks and financial institutions to collect deposits, plus 80 per cent of the bank’s overhead expenses (on staff and rent), plus up to 0.75 per cent profit.

If a bank’s returns on government securities is lower than deposit collection rate, they can add the shortfall in the base rate.

The banks that have maintained their base rate at single digit are the government-owned Rastriya Banijya Bank, which has maintained the lowest base rate in the banking industry at 6.2 per cent, followed by Nabil (6.69 per cent), Nepal Bank (7.03 per cent), Standard Chartered Bank (7.87 per cent) and Everest Bank (7.91 per cent). Apart from the top five in terms of low base rate, Nepal Investment Bank and Himalayan Bank have also maintained base rate below a double digit figure at 9.02 per cent and 9.66 per cent, respectively.

The base rate is also used as a tool to gauge the efficiency of the banks. Banks that have low base rate can offer loans at lower interest rates.

In the meantime, nine commercial banks have hiked their base rates.

These banks include Standard Chartered Bank, Prabhu Bank, Mega Bank, Himalayan Bank, Nepal SBI Bank, Laxmi Bank, Sunrise Bank and Century Commercial Bank. They have increased their base rate in the range of 0.02 percentage points to 0.67 percentage points.

This means that these banks have hiked or will hike the lending rates on the basis of the pressure on the base rate.