Details of Cost of Funds, Credit to Deposit Ratio and Base Rate of Commercial Banks in Latest 3 Quarterly Reports

Feb 06, 2018 Merolagani

All 28 commercial banks operating in Nepal have published their second quarter financial report of the current Fiscal Year (FY) 2074/075. In this article, we are presenting the data of Cost of Funds, Credit to Deposit Ratio and Base Rate of all commercial banks in the latest 3 quarterly report i.e. Q4 of FY 2073/074, Q1 of FY 2074/075 and Q2 of FY 2074/075 in tabular as well as in the bar diagram format.

1. COST OF FUNDS:

I. What is 'Cost of Funds'?

Cost of funds is the interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one of the most important input costs for a financial institution, since a lower cost will generate better returns when the funds are used for short-term and long-term loans to borrowers. The spread between the cost of funds and the interest rate charged to borrowers represents one of the main sources of profit for most financial institutions.

II. ‘TABLE’ - 28 Commercial Banks Cost of Funds in 3 Different Latest Quarterly Report (%)

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II. ‘BAR DIAGRAM’ - 28 Commercial Banks – Average Cost of Funds in 3 Different Latest Quarterly Report

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2. CREDIT TO DEPOSIT RATIO (CD Ratio):

I. What is 'Credit to Deposit Ratio'?

The credit to deposit ratio (CD ratio) is a commonly used statistic for measuring a bank's liquidity by dividing the bank's total loans by its total deposits. This number is expressed as a percentage. If the ratio is too high, it means that the bank may not have enough liquidity to cover any unforeseen fund requirements, and conversely, if the ratio is too low, the bank may not be earning as much as it could be.

Nepal Rastra Bank (NRB) is the banking sector regulator in Nepal that set CD ratio for the commercial banks that is currently at 80%.

II. ‘TABLE’ - 28 Commercial Banks Credit to Deposit Ratio in 3 Different Latest Quarterly Report (%)

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II. ‘BAR DIAGRAM’ - 28 Commercial Banks - Average Credit to Deposit Ratio in 3 Different Latest Quarterly Report

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3. BASE RATE:

I. What is 'Base Rate'?

The base rate is the rate which includes all cost of funds, cost of liquidity, cost of operation and return on their assets as well as the minimum rate banks charge their customers with some profit % included. While publishing their interest rates, commercial banks have to tie their lending rates up with base rates as per the direction of Nepal Rastra Bank (NRB).

II. ‘TABLE’ - 28 Commercial Banks Base Rate in 3 Different Latest Quarterly Report (%)