Nepal, June 28 -- The average base interest rate of commercial banks has dropped below five percent-likely for the first time in Nepal's banking history-as lenders struggle to expand credit in line with surging deposit collections.

For several years, banks have been successively reducing interest rates on deposits, which directly influence the base rate. A lower base rate also signals a potential decline in lending rates for borrowers.

According to reports from 20 commercial banks, the average base rate stood at 4.97 percent in the final month of the current fiscal year (FY 2025/26). Banks typically add a risk-based premium to the base rate to determine lending rates for their clients.

Of these institutions, nine banks reported base r...