Kathmandu: The base rate of banks and financial institutions has been continuously decreasing. As the base rate, which is considered the main determinant of interest rates, is decreasing, the interest rate that banks charge their customers is decreasing. In the last 1 year, the average base rate of commercial banks has decreased by 2.31 percentage points. Interest rates have become cheaper due to excess liquidity in banks. Currently, investable funds are piling up in banks. Despite having enough money to lend, the demand for loans is low.

However, there has been some gradual improvement in credit flow recently. Looking at the data of the last 10 months, it is seen that the credit flow of commercial banks has started increasing. According to the data of the Nepal Bankers Association, the credit flow of banks has increased by 7.44 percent to 4910 billion rupees from Shrawan to mid-Baishakh of the current fiscal year 2081-82.

In the last 1 year, the average base rate of 20 commercial banks has decreased by 2.31 percentage points. The average base rate of banks for the month of Jestha 2082 has been fixed at 6.26 percent. In 2081, the average base rate of banks was 8.57 percent. Currently, the base rate of 2 commercial banks is less than 5 percent.

The lowest base rate is 4.97 percent for Standard Chartered Bank. Similarly, the base rate of Rastriya Banijya Bank is 4.97 percent. Similarly, the base rate of 4 commercial banks is less than 6 percent. The one with the highest base rate is NIC Asia Bank. Its base rate is 7.25 percent.

With the increase in liquidity in banks and financial institutions, banks have been reducing deposit interest rates in a hurry. As the deposit interest rate has decreased, the base rate of banks has also been decreasing. The interest rate of loans is determined by adding a certain percentage premium to the base rate. Therefore, when the base rate decreases, the interest rate of loans also decreases.