More benefit to  borrowers

Kathmandu. The base rate of 21 commercial banks has decreased in April. The base rate of Nepal Investment Bank has remained the same while the base rate of the remaining five banks has increased.

Bank of Kathmandu is among the banks that have reduced the base rate the most. The bank has reduced the base rate by 0.66 percentage points from January. Apart from that, Prabhu and Citizens Bank have reduced the base rate by 0.47 percent, Nepal Bank by 0.33 percent and Laxmi Bank by 0.30 percent.

Similarly, Machhapuchhre Bank has reduced the rate by 0.29 percentage points, Nabil Bank by 0.28 percentage points, Global IME by 0.23 percentage points, NCC Bank by 0.22 percentage points and Agriculture Development Bank by 0.20 percentage points.

NMB and Everest Bank reduced their base rates by 0.13 percentage points and 0.12 percentage points, respectively. It has decreased by less than 10 percentage points.

Barrettes of Sunrise Bank, Rastriya Banijya Bank, Mega Bank, Kumari Bank and Prime Bank have increased during this period. Prime Bank's highest rate was 0.40 percent, Kumari Bank's 0.20 percent, Mega Bank's 0.18 percent, Rastriya Banijya Bank's 0.12 percent and Sunrise Bank's 0.30 percent.

Despite the increase in the base rate, Rastriya Banijya Bank remains the bank with the lowest base rate. Similarly, despite the decline in the base rate of Civil Bank, it remains the bank with the highest base rate.

As of mid-April, the base rate of 22 commercial banks is in single digits. The base rates of the remaining five banks remain in double digits. Sunrise Bank, which had dropped its base rate to single digits in the previous quarter, has reached double digits after rising slightly.

The base rate is considered to be the main basis for determining the interest rate of the loan. Such rate is calculated by adding the cost of funds of the bank, Cost of Compulsory Liquidity Ratio (CRR), Permanent Liquidity Ratio (SLR) cost and operating cost.

When this rate decreases, the interest rate to be paid by the borrower automatically decreases and when it increases, it increases automatically. Banks had last month reduced the maximum interest rate on savings and time deposits by one percentage point. However, interest rates on loans have declined at a relatively low rate.

Banks set interest rates on loans by adding a certain percentage risk premium to the base rate. Risk premiums such as relatively low risk gold loans, term deposit loans, government secured collateral loans have become cheaper. The risk premium of loans including margin nature loans, overdraft loans has been relatively high.