Given that the banks are reeling under a liquidity crisis, they have not been able to extend loans and investments. In such a scenario, the banks are increasing various rates in a bid to increase their profit.
The spread rate fell to 2.99 percent in the second quarter of the current FY which has risen in recent time. The report published by the banks shows that all of them have raised their spread rate in the third quarter.
Currently, the banks are require to maintain 4.4 percent in spread rate as per NRB direction. During the second quarter, the spread rate of 16 commercial banks had fell below 3 percent. However, by the end of third quarter all banks except Standard Chartered Bank has above 3 percent spread rate. Moreover, the spread rate of 5 banks is above 4 percent.
As per the data, NIC Asia Bank has the highest spread rate of 4.4 percent followed by Agriculture Development Bank, Machhapuchchhre Bank and others.
Bank spread is the difference between the interest rate that a bank charges a borrower and the interest rate a bank pays a depositor. Thus, the higher the spread rate, the more the banks earns.
Increasing Base Rate
The average base rate of the banks which rested at 6.91 percent during the last FY has risen to 9.1 percent by the end of third quarter of the current FY. In the three months period, the base rate increased by 8.72 percent to 9.1 percent.
During the period, the base of the some banks have increased above 10 percent which indicates that the borrowers have to pay double digit interest rate to get a loan.
In the review period, Sunrise Bank and Mega Bank logged base rate of 10 percent while many other banks have base rate above 9 percent.
