Central bank makes base rate mandatory for national-level development banks, finance companies

The central bank has directed national level development banks and finance companies to publish base rate from the second quarter of the current fiscal year.

The mandatory base rate for the commercial banks, it had introduced eleven months ago, has also been made mandatory for the national level development banks and finance companies, but not for the one-district and three-district development banks.

Issuing a directive today, the central bank has asked the class B and C financial institutions to compulsorily publish the base rate from mid-January 2014.

The Monetary Policy for the current fiscal year 2013-14 has announced to make the development banks and finance companies publish their base rate.

The base rate will help bring transparency in lending and borrowing rates benefiting borrowers, which will encourage the private sector borrow more to invest. The borrowers can chose the financial institutions that offer cheap interest rates.

It will also make the financial institutions more competitive as they will have to increase their capital base. The financial institutions with higher base rates would not be competitive enough with higher interest rates.

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