RMA revised MLR to 6.38% in December, a 0.42 percentage-point drop from June. Commercial banks adjust lending rates based on business model. MLR is the lowest interest rate banks can charge for loans, determined by the RMA and based on three parameters: marginal cost of funds, negative carry charges on CRR, and operating cost of the banks. Marginal cost includes the cost of acquiring funds, borrowing, and raising money. Bank operating costs, including salaries, rent, and technology, are calculated by each bank. The national MLR is derived from the average across all banks, and it’s reviewed every six months.
The final lending rate includes a credit risk premium, reflecting borrower creditworthiness, loan tenure, and business strategy, which determines the bank’s profit margin. Bankers argue that lowering lending rates requires a reduction in deposit interest rates, reflecting the efficiency of the financial system. Some banks offer higher rates, while others offer lower rates for consumer and government loans. BNBL offers a floating rate of 10.5 percent for trade and commerce loans, while BoBL and BNBL offer term loans at 10.76 percent for up to 30 years. T-Bank offers the highest deposit rates at 5.90 percent per annum. Time deposits have improved from Nu 96.94 billion in November 2023 to Nu 101.67 billion as of November last year.
