Kathmandu: The Nepal Rastra Bank (NRB) has unveiled a cautiously flexible monetary policy for the upcoming fiscal year 2082/83, aiming to promote economic growth, reduce borrowing costs, and widen access to credit while ensuring macroeconomic stability.

Interest Rate Cuts to Support Economic Activity
Governor Dr. Bishwanath Poudel, presenting the policy, said that the NRB has lowered key interest rates in light of low inflation and a favorable balance of payments situation. The bank rate has been reduced from 6.5% to 6%, the policy rate from 5% to 4.5%, and the deposit collection rate (the lower bound of the interest corridor) from 3% to 2.75%.

The central bank is targeting 6% economic growth in the new fiscal year while keeping inflation within 5%. To support this, the NRB has set targets of 13% broad money supply growth and 12% credit growth to the private sector.

Higher Loan Limits for Housing and Investments
The monetary policy has introduced more liberal lending provisions for personal housing and investment in shares. The loan ceiling for purchasing or constructing private homes has been increased from Rs 20 million to Rs 30 million. For first-time homebuyers, up to 80% of the property value can be financed, while the limit is 70% for others.

Similarly, the maximum share mortgage loan for individuals has been raised from Rs 150 million to Rs 250 million, and the foreign travel allowance has been increased from USD 2,500 to USD 3,000.

Support for Agriculture and Small Businesses
The NRB has prioritized access to finance for the agriculture sector and micro, small, and medium enterprises (MSMEs). Banks and financial institutions can now issue agriculture loans up to Rs 1 million based on the valuation of crops, farmland, or agri-infrastructure, with minimum provisioning required during the grace period.

Efforts will also be made to simplify and tailor loan terms based on the business cycle of various sectors including agriculture, education, health, media, and small industries. Loans up to Rs 30 million will now be counted under SME financing and allowed to carry a maximum interest premium of 2% above the base rate.

Relief for Earthquake-Hit Borrowers
In areas impacted by the recent earthquake, such as Jajarkot and Rukum, banks are permitted to restructure or reschedule loans if borrowers repay at least 10% of the due interest. This measure aims to ease the financial burden of affected individuals and businesses.

Reforms to Strengthen Liquidity and Reduce Risks
The NRB has proposed new measures to enhance liquidity management and strengthen banking sector regulation. These include:

-Issuing guidelines on internal liquidity assessment

-Establishing an Asset Management Company to handle non-performing loans (NPAs) and non-banking assets

-Revising the blacklisting framework

-Adjusting rules on interest rate calculation and hire purchase loans

Additionally, the central bank will promote debenture investments in government-designated infrastructure projects and remove the 15x core capital deposit ceiling for national-level finance companies.

Boost to Concessional Lending and Credit Scoring
To support the government's concessional loan programs, the NRB will facilitate their implementation and improve access to finance for low- and middle-income households. A provision has also been introduced for banks to begin issuing loans based on customer credit scores, enhancing risk-based lending.

Broader Policy Reforms and Institutional Review
The monetary policy signals a review of:

-The branch expansion strategy amid rising digital transactions

-The classification and roles of financial institutions

-The existing prompt corrective action mechanism

NRB also plans to amend regulations to better address the challenges faced by financial institutions and realign resources to priority sectors, including agriculture, infrastructure, and SMEs.

Outlook: A Balancing Act Between Growth and Stability
Governor Poudel stated that the 2082/83 monetary policy is a balanced approach—ensuring financial discipline while encouraging private investment and supporting government borrowing needs. With a cautiously optimistic stance, the NRB hopes the policy will revitalize economic activity, ensure financial stability, and prepare the financial sector to absorb external and domestic shocks.