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Published on: 2017-06-16     503 times read    0  Comments

BFIs Risk Losing Good Debtors Due to High Base Rate

June 16: As the banks and financial institutions with high base rates charge higher interest rates on loans, they are likely to lose good debtors.

The situation was created after the Nepal Rastra Bank (NRB) directed the BFIs to fix the interest rates of loans on the basis of base rate.

As per the directive, the BFIs cannot charge interest rates on loans less than the base rates. Due to this system, debtors paying back the loans on time are likely to be attracted towards low base rate BFIs. As a result, the profit of BFIs with higher base rate can be decreased and this will compel the financial institutions to go to merger.

Earlier, BFIs having high base rate were also providing loans on low interest rate and though NRB had made declaration for base rate, the interest of loans was not associated with it. The BFIs are required to publish their base rate on a monthly basis.

According to the third quarter financial reports published by the commercial banks, their present base rate is not less than six percent due to which the interest on loans will not be less than eight percent.

Similarly, some banks even have to charge interest rates more than 12 percent. As per the third quarter financial reports published by banks and financial institutions, base rate of BFIs ranges from 5.71 percent to 11.42 percent.

The statistics till April 13 of the current fiscal year shows that the base rate of Standard Chartered, Rastriya Banijya Bank, Nabil Bank and Nepal Bank is less than six percent. Likewise, the base rate of Himalayan Bank, Everest, Siddhartha, Prime and Bangladesh Bank stands around eight percent.

Laxman Risal, CEO of NIC Asia Bank opines that the high base rate will be a distracting factor for big and good debtors. The base rate of NIC Asia which was 10 percent till April 13, has reached 10.50 percent by May 14.                                                  

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