NRB Keeps Key Policy Rates Unchanged, Expands Scope of Sectoral Lending

Nepal Rastra Bank (NRB) has kept the existing provisions unchanged for the interest rate corridor, bank rate, cash reserve ratio (CRR) and statutory liquidity ratio (SLR) while unveiling the mid-term review of the Monetary Policy for the current fiscal year (FY 2025/26).

Through the review, the central bank has introduced measures aimed at expanding credit flow to productive sectors. The scope of sectoral lending, previously limited to agriculture, energy, and micro, cottage and small enterprises, will now be extended to include tourism, information technology and export-oriented industries utilizing domestic raw materials.

NRB also said it will revise the provision related to the minimum lending ratio that banks and financial institutions (BFIs) must maintain in each priority sector.

The central bank has decided to amend the working capital loan guidelines. Under the revised arrangement, BFIs will be allowed to determine the maturity period of such loans based on an analysis of the borrower’s cash flow and financial statements. Likewise, the existing provision requiring borrowers to reduce at least 10 percent of their outstanding working capital loan for a minimum of seven consecutive days each year has been revised. Borrowers will now be required to reduce the outstanding amount to below 30 percent during that period.

To provide relief to businesses displaced by the expansion of the Mahendra Highway and the Mid-Hill Highway, NRB will allow banks to restructure or reschedule such loans at a minimum interest rate of 10 percent until mid-July 2027.

Under foreign exchange risk management measures, the limit on non-deliverable forward transactions undertaken by BFIs has been increased from 25 percent to 30 percent of primary capital.

NRB also said it will facilitate foreign investment in infrastructure such as data centres, cloud computing, robotics labs and artificial intelligence facilities, and encourage lending to such projects through consortium financing.

To promote electronic payment systems, the central bank has adopted a strategy to gradually reduce transactions conducted through cheques. It also stated that borrowers unable to repay loans due to genuine circumstances will not be blacklisted. If such borrowers initiate repayment with valid reasons, they may be removed from the blacklist for up to six months.

The review further stated that programmes related to the central bank under the recently approved Second Financial Sector Development Strategy (2025/26–2029/30) will be implemented in phases. – With inputs from RSS