What is the Base Rate of Banks and Financial Institutions ?

The base rate of banks and financial institutions primarily refers to the rate calculated based on the institution's cost. When calculating this rate, the costs that the institution incurs for acquiring funds, such as deposits, the costs for maintaining the mandatory reserve as per the regulations of the central bank, liquidity maintenance costs, and operational costs, are included and calculated as a percentage.

Calculation of the Base Rate

According to the information issued by Nepal Rastra Bank for financial awareness, the base rate is calculated as follows:

Base Rate = Cost of Funds + Mandatory Reserve Cost + Statutory Liquidity Cost + Operational Cost (all in percentage)

Information Regarding the Base Rate

- The base rate fluctuates every month.

- Information about the base rate can be obtained from newspapers and the respective bank's website.

Do Banks and Financial Institutions Include Profit in the Base Rate?

According to the current provisions, the base rate calculation does not include profit or returns. Thus, banks and financial institutions calculate the base rate based on their costs, without adding profit, and this rate is subject to regular fluctuations.