NRB Unveils Mid-Term Review of Monetary Policy; Microfinance Loan Interest Rates to Follow Base Rate System

Nepal Rastra Bank (NRB) has released the mid-term review of the monetary policy for the current fiscal year. The review was approved during the central bank’s board meeting, which commenced today at 5 PM.

Despite inflationary pressures indicating the need for higher policy rates, NRB has opted to maintain its flexible approach to support economic expansion. The policy rate remains at 5.0%, with the deposit collection rate at 3.0% and the bank rate at 6.5%. The mandatory cash reserve ratio and statutory liquidity ratio remain unchanged.

Starting from Jestha 2082, microfinance institutions must link their lending rates to the base rate. The loan-to-value (LTV) ratio for personal and electric vehicles is set at 60%. Additionally, the loan loss provision for good loans has been reduced from 1.1% to 1%, easing financial institutions’ reserve requirements. According to bankers, this is expected to increase the overall profit of banks by Rs. 5 Arba.

Furthermore, the limit on non-deliverable forward contracts has been raised from 15% to 20% of primary capital, providing greater flexibility in foreign exchange risk management.

Monetary Policy Review: