KATHMANDU: Nepal Rastra Bank (NRB) has kept key policy rates, the bank rate, and the standing deposit facility rate unchanged in its monetary policy for the upcoming fiscal year, maintaining its current monetary stance amid the prevailing economic environment.
The central bank has also continued existing provisions on the Cash Reserve Ratio (CRR) and the Statutory Liquidity Ratio (SLR). By keeping policy rates stable, the NRB aims to promote a low-cost economy while maintaining confidence in the private sector through a flexible policy approach.
Regulatory reforms in lending
The monetary policy proposes several regulatory reforms in the banking sector. The NRB has announced plans to remove the unlimited liability arising from personal guarantees used as collateral for loans.
It also aims to revise policies to reduce the number of individuals deprived of banking services after being blacklisted due to cheque dishonour.
The policy states that limits on share-backed loans will be determined based on the financial strength of institutions. It also provides for easing the loan-to-value ratio for large public electric vehicles and introducing special measures to manage non-performing loans in distressed industries and support the revival of stressed credit.
Focus on digitalisation and liquidity management
The central bank has placed greater emphasis on digitalisation to reduce financial costs and improve service quality. It also plans to study the possibility of introducing peer-to-peer lending based on individual credit scoring.
To strengthen liquidity management, commercial banks will be encouraged to invest in foreign government securities. The fixed exchange rate regime with the Indian rupee has also been retained as a key monetary anchor.
The NRB said it would review its monetary policy stance if inflationary pressures intensify or economic stability comes under threat. It also plans to gradually narrow the interest rate corridor over time.
Inflation and growth targets
The monetary policy targets inflation within 5.5 percent in the coming fiscal year while aiming for 7 percent economic growth.
Despite ongoing global geopolitical tensions affecting supply chains, the central bank projects inflationary pressures to ease from the fourth quarter of the next fiscal year. It has also set a target of maintaining foreign exchange reserves sufficient to finance at least seven months of imports of goods and services.
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