What are the current interest rates offered by commercial banks on deposit and loan products? Check if changing bankers will add more value to your operations

As the new and final quarter for the  year 2075 approaches dawn, the commercial banks have been in spree to release new interest rates on deposit and loan products.

For the interest rate on savings product, all the commercial banks have entered into a gentleman’s agreement to fix a cap on the maximum rate of interest they can provide. As for the main determinant of interest rates on loan products, the base rate which includes all cost of funds, cost of liquidity (CRR and SLR), and cost of operation, for the new quarter have been published by the commercial banks.

The banks add a premium on the base rate to derive the final interest on loans. This premium is based on many factors like, credit worthiness of the customer, amount of loan etc. However, a higher base rate doesn’t always mean that the final interest on loan will also be high. On the contrary, a lower rate of premium doesn’t always mean that the final interest on loan will also be low.

The base rate of a commercial bank is a fair reflection of the costs incurred by the banks. Therefore, a higher base rate means that the cost incurred by the banks is high and vice versa.

Margin Type Loan is a loan that the commercials banks provide against shares as collateral. The banks have a different rate of premium which is added to the base rate to derive the final interest on loan for a customer. Since, the loan is issued against the shares held by the customer, the current market price of the shares is a major influencing factor in these loans. It is also affected by the perspective of the banks regarding the future performance of the shares.

For the sake of clarity and ease to the investors, a list has been compiled that includes relevant data regarding the interest rate on savings, latest base rate and premium added to Margin type loans of all 28 commercial banks.

As we can see, since none of the banks have broken the gentleman’s agreement this time, the maximum interest rate on savings provided by commercial banks is uniform 6.50% for most of the banks. Other banks have lower interest rate than 6.50%. Nepal SBI Bank (SBI) and Rastriya Banijya Bank (RBB) provide the lowest rate of interest on savings product in the industry.

Similarly, the fixed deposit rates provided by banks are also uniform at 9.25% p.a. for individuals and 8.50% p.a. for institutions for a period of 1 year or above.

Both government banks, RBB and Nepal Bank Limited (NBL) are leading the race to have the lowest base rate among commercial banks with base rate of 5.60% and 6.54% respectively. Century Commercial Bank (CCBL) has the highest base rate in the industry at 11.50% while three other commercial banks have base rate more than 11%. The base rate for the industry averages at 9.74% based on the above mentioned base rates. Only 10 out of 28 commercial banks have below average base rates.

The premium added on base rate for margin type loan varies between 0% and 8% in the industry. As mentioned earlier, the rate of premium depends on many factors due to which the final interest on loan product varies from customer to customer.