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Abstract
This study examines the Impact of Interest Rate on Stock Price of Commercial Bank in Nepal. Stock price
is the dependent variables and the bank rate, deposit rate, base rate, lending rate and the risk-free rate of
return (T-bills) is the independent variable of the study. The study is based on the secondary data of 10 out
of 19 listed commercial banks in the NEPSE with 100 observations for the period cover from 2014/15 to
2023/24. The supplementary data on interest rate collection from published financial and statistical report
by Nepal Rastra Bank (NRB), Ministry of finance and annual reports of the selected commercial banks. A
descriptive and causal comparative methodology was adopted. Correlation, regression, analysis of
variance (ANOVA), coefficient of regression was conducted to test the significance and impact of interest
rate on stock prices in the context of listed commercial banks in NEPSE index. The study indicates that the
deposit rate and stock price show statistically negative significant relationships. Likewise, the lending rate
and stock price have a significant negative relationship. However, the bank rate, base rate and risk-free
rate of return (T-bills), do not show statistically significant relationships with stock prices. Deposit rate
and lending rate are the key to enhancing stock price. Banks with lower deposit rates tend to generate
better stock returns for their shareholders, while higher deposit and lending rates can decrease stock
prices. Policymakers and regulators should encourage banks to lower deposit and lending rates to boost
stock prices. This approach could enable investors to achieve higher returns on their stocks if deposit and
lending rates are reduced.
Key words: Bank Rate, Deposit Rate, Base Rate, Lending Rate, T-bills Rate and Stock Price.