24th July 2023, Kathmandu
The Nepal Rastra Bank has unveiled its highly anticipated monetary policy for the fiscal year 2080/81, outlining a comprehensive plan to steer the nation towards a path of sustainable economic growth while ensuring price stability and financial sector resilience.
Targeting Inflation:
The central bank sets a goal to maintain the inflation rate at 6.5 percent, striking a balance between price stability and economic growth.
Boosting Economic Growth:
Nepal aims for a 6 percent economic growth, with a strategic allocation of financial resources towards productive sectors that drive economic expansion.
Expanding Money Supply and Private Sector Loans:
The monetary policy aims to achieve a money supply growth of 12.5 percent and a notable 11.5 percent increase in loans to the private sector from banks and financial institutions.
Flexible Cash and Liquidity Ratios:
The mandatory cash ratio and statutory liquidity ratio will be adjusted as needed to ensure efficient liquidity management.
Interest Rate Management:
The bank rate will remain steady at 7.5 percent, while deposit and lending rates will be adjusted to 5.5 percent and 4.5 percent, respectively, in line with market conditions.
Facilitating Home Loans:
To encourage homeownership, the limit for the first home loan will be increased from NPR 1 crore 50 lakhs to NPR 2 crores.
Investment Guidelines Review:
The central bank will revisit guidelines about the investment of excess funds to streamline the process.
Easing Foreign Investment and Loans:
Simplified procedures for foreign investment and foreign loan management will be implemented, fostering a conducive environment for international investors.
Liberalizing Foreign Exchange Facilities:
Nepali citizens traveling to countries other than India will now be allowed to access up to USD 1,500 twice a year, with a revised provision enabling access to up to USD 2,500.
Robust Foreign Exchange Reserves:
The central bank aims to maintain foreign exchange reserves sufficient to cover imports of goods and services for at least 7 months.
Strengthening Interest Rate Corridor:
A fully functional permanent deposit collection facility will be established in the lower corridor of the interest rate corridor to enhance its effectiveness.
Resolving Stressed Loans:
The Stressed Loan Resolution Framework will be introduced to revitalize and manage loans for borrowers facing difficulties due to natural disasters or other exceptional circumstances.
Improved Risk Classification:
The central bank will guide commercial banks in implementing risk classification for their property assets.
Capital Adequacy Framework:
National development banks will adopt the Capital Adequacy Framework of 2015 to ensure financial stability.
Implementation of Expected Credit Loss Model:
Necessary policies for implementing the Expected Credit Loss Model as per Nepal Accounting Standards will be translated and enforced.
Targeted Loan Investments:
Existing provisions regarding loan investments will be reviewed based on an analysis of the current status of loan flow in specific sectors.
Borrowers’ Permanent Account Number (PAN):
The requirement for borrowers availing loans beyond a specified limit to obtain a permanent account number will be re-evaluated.
Enhancing Investment in Private Equity Funds/Venture Capital Funds:
Investment-related provisions for Private Equity Funds/Venture Capital Funds approved by the Debenture Board will be streamlined for ease of investment from banks and financial institutions.
Credit Scoring Measurement System:
A credit scoring measurement system will be developed in coordination with relevant authorities to assess borrowers’ creditworthiness.
Regulatory Body for Savings and Credit Cooperatives:
Efforts will be made to establish a separate regulatory body to oversee and supervise savings and credit cooperatives, ensuring effective regulation.
The monetary policy, with its diverse set of measures, seeks to promote economic prosperity, foster a conducive investment climate, and strengthen financial stability for Nepal’s fiscal year 2080/81.
Download the Nepal Rastra BANK Monetary Policy 2080-81: Click Here
