The Nepal Rastra Bank (NRB) has issued the monetary policy for the fiscal year 2082/83 (2025-26) on 11 July.
On the occasion of unveiling the monetary policy, the Governor of the Central Bank, Dr. Biswo Nath Poudel, mentioned that a flexible policy has been adopted very cautiously.
Observes noted that the policy aims to address current economic slowdown by managing the country’s money supply, controlling inflation, balancing foreign income and expenditure and maintaining financial sector stability. It supports the Government’s plan to provide additional working capital to struggling sectors.
The monetary policy mentions approving and implementing the second financial sector strategy. The bank rate, which serves as the upper limit of the interest rate corridor, has been set at six per cent, and the policy rate at four and a half per cent. Previously, the bank rate was 6.5 per cent and the policy rate was 5 per cent.
According to the monetary policy, the limit for loans issued for the construction and purchase of private residential houses has been increased from Rs 20 million to Rs 30 million. When constructing or purchasing the first house, a loan-to-value ratio of up to 80 per cent can be maintained, while for others, a maximum of 70 per cent can be established.
The limit for personal share collateral loans has been increased from Rs 150 million to Rs 250 million. The limit for the amount Nepalese traveling abroad can carry has been increased from two thousand five hundred US dollars to three thousand US dollars.
The monetary policy has set a target to increase the private sector loan disbursement by 12 per cent in the upcoming fiscal year.
Key highlights of the Monetary Policy for FY 2082/83:
1. The foreign exchange limit for Nepali travelers has been increased from USD 2,500 to USD 3,000 per person.
2. Banks and financial institutions are allowed to raise their capital as needed, subject to Nepal Rastra Bank’s approval.
3. The maximum limit for individual margin loans has been raised from Rs. 15 crore to Rs. 25 crore.
4. Banks can lend up to 70% of the average market price or the last 180 days’ average price of shares, whichever is lower.
5. A flexible and accommodative monetary policy stance has been adopted to support the sluggish economy.
6. The policy rate has been reduced from 5% to 4.5%, and the bank rate lowered by 0.5 percentage points to 6%.
7. The deposit collection rate has been reduced from 3% to 2.75%.
8. Private sector credit growth is projected at 12% for the upcoming fiscal year.
9. The government aims for 6% GDP growth and to keep inflation within 5.5%.
10. The home loan limit for first time buyer has been increased to Rs. 3 crore.
11. Banks can now provide housing loans up to 70% of property valuation, increased from the previous 50%.
12. For first-time home construction or purchase, the loan-to-value ratio may be up to 80%.
13. Provisions allowing microfinance institutions to distribute annual dividends exceeding 15% (cash or bonus) will be reviewed.
14. Restrictions on “Class C” national-level finance companies deploying deposits up to 15 times their primary capital will be removed.
15. The limit on non-deliverable forwards based on primary capital by banks and financial institutions will increase from 20% to 25%.
16. The capitalization of interest on loans extended to the energy production sector will be reviewed.
