Monetary Policy for 2024/25: Key Highlights

KATHMANDU: Nepal Rastra Bank (NRB) unveiled Monetary Policy for fiscal year 2024/25 on Friday.

Through the policy, the central bank has introduced several key changes aimed at boosting the financial sector and addressing challenges in the capital market. The policy includes measures to promote margin trading, ease lending restrictions, and support microfinance institutions. Notable changes include the removal of the cap on share collateral loans for institutional investors and a reduction in policy rates to stimulate economic growth.

Governor Maha Prasad Adhikari presented the new monetary policy at a special ceremony organized at the NRB Central Office in Kathmandu.

Here were present the key highlights of the monetary policy:

• Rs 200 million cap on share collateral loans for institutional investors has been removed
• Provisioning requirement for performing loans reduced from 1.20% to 1.10%
• Prioritization of microfinance mergers and acquisitions
• Policy rate reduced from 5.5% to 5%
• Credit expansion target increased to 12.5% from 11.5%
• Risk burden for real estate, high-value vehicles, and share mortgages loans of up to Rs 5 million reduced
• No blacklisting for institutions funded by private equity and venture capital facing investment issues
• Provisions for loan restructuring for microfinance customers facing repayment difficulties
• Review of regulatory framework for microfinance interest rates and service charges
• No individual will be blacklisted solely based on a bounced check; this measure will remain in effect until a new regulation on credit information is implemented
• If one partner of a joint venture construction company is blacklisted, it will not affect the banking transactions of the other partner(s) in the same JV
• Banks are now allowed to keep loans, which have become regular after being classified as non-performing, in watch list. Previously, such loans had to remain classified as non-performing for 6 months even after becoming regular
• Necessary facilitation will be provided for loan classification and risk management for businesses that are currently closed due to situational reasons but continue to make regular loan payments
• Collateral-free loans will be made available for people who have obtained labor approval to work abroad and furnish proof of assurance that they will make remittance transfers to their bank accounts
• The central bank will create a separate mechanism for regulation and supervision of savings and credit cooperative institutions in coordination with the government
• Nepal Rastra Bank (NRB) has increased the foreign exchange facility for import of goods from $35,000 to $50,000 through draft/telex transfer