The midterm review of Nepal’s Monetary Policy 2081/82 reflects a balanced approach toward economic growth and financial stability. While inflation control and liquidity management remain key concerns, the policy has been effective in maintaining overall economic stability. The coming months will be crucial in determining the success of these adjustments, especially in boosting investment and reducing external vulnerabilities.
Monetary Policy Review Made Public, ‘Provision’ Rate for Good Loans Reduced
Nepal Rastra Bank has published the second monetary policy review for the current fiscal year. According to the public arrangement, the provision rate for good loans has been reduced to 1 percent. Previously, this rate was 1.1 percent.
Loans that are overdue up to 3 months have been classified as good loans. Banks will now only need to make a 1 percent provision for such loans. This will help reduce the provision amount for banks.
Nepal Rastra Bank has stated that the existing policy rate in the monetary policy has been maintained at 5 percent, the deposit collection rate, which serves as the lower limit under the interest rate corridor, at 3 percent, and the bank rate, which serves as the upper limit under the interest rate corridor, at 6.5 percent.
Nepal’s Central Bank Introduces Policy Making Electric Vehicle Purchases More Difficult While Easing Restrictions on Petrol Vehicles
Nepal Rastra Bank has made it more difficult for banking facilities to purchase electric vehicles (EVs). On Tuesday, while publishing the mid-term review of the current fiscal year’s monetary policy, the central bank reduced the loan-to-value ratio for EVs from 80 percent to 60 percent.
In contrast, the bank has made financing more accessible for petrol and diesel-powered personal vehicles. The loan-to-value ratio for these vehicles, which was previously 50 percent, has been increased by 10 percent to 60 percent.
With this change, the loan-to-value ratio for both petrol/diesel vehicles and electric vehicles is now equal at 60 percent.
Summary of the midterm review of the monetary policy for the fiscal year 2081-82
Economic Growth & Inflation:
- The policy aims to balance inflation and economic growth.
- Inflation has been managed but remains a key concern.
Monetary Policy Stance:
- The policy focuses on maintaining financial stability.
- Interest rates have been adjusted to encourage lending while controlling inflation.
Banking & Financial Sector:
- Credit growth has been reviewed, with emphasis on priority sectors.
- Measures have been taken to strengthen liquidity management.
Foreign Exchange & Reserves:
- The review discusses foreign currency reserves and their impact on trade.
- The exchange rate policy remains flexible to support economic stability.
Investment & Business Support:
- Steps are being taken to promote business investment and economic development.
- Special attention is given to infrastructure and productive sectors.
Policy Adjustments:
- The central bank has made necessary adjustments to interest rates and credit policies.
- Measures to ensure sustainable financial stability are in place.
Interest Rates on Microfinance Loans to Change According to Base Rate Similar to Banks
Microfinance financial institutions will be changing their loan interest rates. According to the current arrangement, microfinance financial institutions are required to charge customers a 15 percent interest rate on loans, but this has been revised to allow them to set interest rates linked to the base rate.
The central bank has changed the interest rates for microfinance loans while conducting the semi-annual review of the monetary policy. The new loan interest rates will be effective from Jestha 2082 (May-June 2025).
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