NRB keeps key rates unchanged, says provisions to provide SDF will be reviewed

KATHMANDU: Nepal Rastra Bank (NRB) has kept key monetary policy rates unchanged in its latest review of the Monetary Policy for fiscal year 2025/26.

Unveiling the third-quarter review of the monetary policy on Friday, the central bank said the existing policy direction adopted since the beginning of the fiscal year would continue as inflation and foreign exchange reserves have remained broadly within targeted levels.

“The flexible monetary policy stance adopted since the start of the current fiscal year has been continued in view of the low economic growth situation, based on projections that foreign exchange reserves and inflation will remain within the central bank’s targets,” the NRB said.

The central bank said provisions related to the interest rate corridor, bank rate, cash reserve ratio (CRR), and statutory liquidity ratio (SLR) would remain unchanged.

NRB, however, said it would review the provision allowing banks and financial institutions to access the Standing Deposit Facility (SDF) in a bid to make the interest rate corridor more effective.

The SDF is a monetary policy tool used by the central bank to absorb excess liquidity from the banking system without collateral and serves as the lower bound of the interest rate corridor.

In its mid-term review of the monetary policy, the NRB had maintained the SDF rate at 2.75%.

Although non-performing loans (NPLs) of banks and financial institutions have increased slightly, the central bank expects the situation to improve alongside the recovery in economic activities. It said the primary capital and capital adequacy ratios of banks and financial institutions remained within regulatory limits as of mid-April 2026, indicating overall financial stability.

The NRB said inflation has remained below its target, though global geopolitical tensions have continued to pose risks. “Despite this, the average consumer inflation during the first nine months of the current fiscal year stood at 2.39% and is expected to remain within the targeted ceiling,” it added.