Kathmandu: Nepal Rastra Bank (NRB) unveiled the Monetary Policy for the Fiscal Year 2024/25 today, announcing a reduction in the bank rate and the deposit collection rate. NRB Governor Maha Prasad Adhikari presented the policy, which aims to create a more vibrant economy while maintaining price stability and addressing external sector issues.

Governor Adhikari stated, "The upper limit of the bank rate in the interest rate corridor has been reduced to 6.5 percent from 7 percent, and the policy rate has been set at 5 percent from 5.5 percent." However, the deposit collection rate, which serves as the lower limit of the interest rate corridor, remains unchanged at 3 percent. The NRB continues to offer a permanent liquidity facility at the bank rate, with flexible conditions to facilitate liquidity availability.

Key Highlights of the Monetary Policy
Interest Rates: The bank rate and policy rate have been lowered to 6.5 percent and 5 percent, respectively, while the deposit collection rate stays at 3 percent.
Capital Fund Management: The policy introduces flexible provisions for managing pressure on capital funds of banks and financial institutions, encouraging the use of capital fund instruments and new instruments.
Credit Loss Provision: The provision for a 1.20 percent credit loss on good loans has been reduced to 1.10 percent.
Regulatory Retail Portfolio (RRP): The RRP limit has been increased from Rs 20 million to a maximum of Rs 25 million.
Microfinance Institutions: The policy prioritizes protecting clients' interests, addressing complaints, and encouraging mergers among microfinance institutions.
Cooperatives: Measures are in place to facilitate government efforts in refunding savers' money up to Rs 500,000 based on cooperative asset security.
Loan Facilities: The policy eases the process of obtaining loans against agricultural product mortgages and provides loans without collateral based on remittance assurances for foreign migrant workers.
Reactions and Future Steps
The Federation of Nepalese Chamber of Commerce and Industry (FNCCI) reacted positively, with President Chandra Dhakal noting that many concerns of the private sector were addressed. He highlighted the reduction in bank and policy rates, flexibility in capital fund management, and the 12.5 percent loan expansion target as positive aspects.

Similarly, the Nepal Chamber of Commerce welcomed the reduction in interest rates but pointed out that some issues remain unaddressed.

Prime Minister KP Sharma Oli also commented on the positive reception of the new monetary policy, expressing hope for rapid progress and significant achievements in national development. He emphasized the need for implementing the 16th periodic plan and focusing on both production growth and human and physical development.

The NRB’s new monetary policy aims to create a conducive environment for investment and economic growth while maintaining fiscal stability and addressing structural issues in the financial sector.