KATHMANDU: People planning to buy vehicles through installment financing can now get loans at cheaper interest rates. As the base rates of commercial banks continue to decline month after month, it has become possible to obtain vehicle loans at lower interest rates.
Currently, the average base rate of banks has dropped to around 5.12 percent. With base rates falling significantly, lending interest rates have also become the lowest in history. Nepal Rastra Bank officially started publishing the monthly average lending interest rates from the first half of 2012. Based on this record, the current base rate is the lowest so far.
Loan interest rates, which had reached around 15-16 percent three years ago, have now dropped to an average of about 7 percent. Moreover, borrowers taking loans from banks with lower base rates can get interest rates as low as 5.5 to 6 percent.
Currently, banks provide loans by adding a premium of up to 5 percent on the base rate. The minimum premium depends on the customer’s bargaining power. Due to high liquidity in the banking system, customers who can negotiate well are able to secure loans with a premium of only 0.5 to 1 percent. Accordingly, many borrowers are currently taking loans at interest rates ranging from around 5.5 to 7 percent.
Banks are also offering auto loans at fixed interest rates for customers who prefer stable repayment plans. At present, fixed-rate auto loans are available at interest rates ranging from about 7 percent to 9-10 percent. These loans are generally provided for a period of five to seven years.
Lower interest rates benefit borrowers by reducing the overall cost of financing. Buying a car through a loan at a lower interest rate helps reduce the monthly interest burden.
Base rates of five banks drop below 5 percent
The lower the base rate of a bank, the cheaper the loan it can offer. Currently, the base rates of five out of Nepal’s 20 commercial banks have dropped below 5 percent.
Among them, Rastriya Banijya Bank has a base rate of 4.36 percent, Standard Chartered Bank Nepal 4.52 percent, Everest Bank 4.73 percent, Nabil Bank 4.91 percent, and Nepal Bank Limited 4.98 percent. If customers can negotiate the premium, loans from these banks could start from around 5.5 percent. However, Standard Chartered currently does not provide auto loans.
Similarly, the base rates of Agricultural Development Bank, Global IME Bank, Nepal Investment Mega Bank, Sanima Bank, Prabhu Bank, NMB Bank, and Machhapuchchhre Bank are currently between 5 and 5.5 percent. Loans from these banks can be obtained at minimum interest rates of around 6 to 6.5 percent.
Meanwhile, the base rates of Laxmi Sunrise Bank, Nepal SBI Bank, Siddhartha Bank, Kumari Bank, Citizens Bank International, Himalayan Bank, and Prime Commercial Bank range between 5.5 and 6 percent. Auto loans from these banks are generally available at interest rates of around 7 to 7.5 percent.
Among the 20 commercial banks, NIC Asia Bank has the highest base rate at 6.41 percent, making borrowing comparatively more expensive.
