NRB unveils monetary policy for FY 2025/26; policy rate set at 4.5 pc, bank rate at 6 pc

KATHMANDU: Nepal Rastra Bank (NRB) today issued the monetary policy for fiscal year 2025/26. The policy adopts a cautiously flexible stance to sustain recovery and keep inflation close to 5%.

Unveiling the monetary policy, Governor of the Central Bank, Dr Biswo Nath Poudel, stated that the monetary policy is designed to support private investment and ensure financial stability amid global uncertainty.

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 6%, and the policy rate at 4.5%. Previously, the bank rate was 6.5% and the policy rate was 5%.

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% can be maintained, while for others, a maximum of 70% 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 Nepalis travelling abroad can carry has been increased from $2,500 to $3,000.
    
The monetary policy has set a target to increase the private sector loan disbursement by 12% in the upcoming fiscal year.

The Governor noted that ample liquidity and lower interest costs must bolster capital formation and productive investment. He reaffirmed the bank’s commitment to monitor inflation, external balances and credit trends, and to adjust operations as needed.

The policy also supports government borrowing of Rs 362 billion internally and Rs 233.66 billion externally. It maintains a 0% counter-cyclical capital buffer and preserves standard-loan provisioning at 1%.