Nepal Rastra Bank (NRB) has introduced a flexible monetary policy for Fiscal Year 2025/26 aimed at revitalizing economic growth through relaxed lending measures and improved liquidity support.
Unveiled by NRB Governor Dr. Bishwo Nath Poudel during a live broadcast on Friday, the policy raises the housing loan limit to Rs 30 million and sets a 12% target for private sector credit expansion.
The revised housing loan cap—up from the previous Rs 20 million—applies to the construction or purchase of private residential houses. The loan-to-value (LTV) ratio remains at 80% for first-time homebuyers and 70% for others. The ceiling for personal share-backed loans has also been increased from Rs 150 million to Rs 250 million, signaling a move to ease lending restrictions.
The monetary policy aligns with the government’s 6% economic growth target. It also aims to expand the broad money supply by 13% while keeping inflation below 5% and maintaining foreign exchange reserves adequate for seven months of imports.
Key policy rates have been revised to inject liquidity into the banking system. The bank rate has been cut from 6.5% to 6%, the policy rate from 5% to 4.5%, and the deposit collection rate from 3% to 2.75%. While the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) remain unchanged, Governor Poudel said the overall policy stance is accommodative and intended to boost aggregate demand without eroding real deposit interest rates.
Microfinance Dividend Cap to Be Reviewed
NRB will review the 15% dividend distribution cap currently imposed on microfinance institutions. In past years, institutions distributing dividends above this threshold were required to allocate a significant portion to reserve, client protection, and corporate responsibility funds. The new policy signals flexibility in this approach.
Measures to Exit FATF Grey List Strengthened
To expedite Nepal’s removal from the Financial Action Task Force (FATF) grey list, the central bank will intensify monitoring, investigation, and enforcement of suspicious transactions. Coordination among regulatory and investigative bodies will be enhanced, while financial intelligence sharing will be automated to improve case follow-ups. Nepal also plans to implement recommendations from the Asia/Pacific Group on Money Laundering's third mutual evaluation report.
Import Settlement Limits Increased
NRB has increased the threshold for import settlement via Documents against Payment (D/P) and Documents against Acceptance (D/A) to USD 100,000, up from USD 60,000. Similarly, for imports made via drafts or telegraphic transfers (TT), the limit has been raised from USD 35,000 to USD 50,000.
However, government agencies procuring goods under the Public Procurement Act are exempt from these ceilings and may use multiple payment channels.
Higher Foreign Currency Allowance for Personal Travel
Individuals traveling abroad can now carry up to USD 3,000, an increase from the earlier limit of USD 2,500. The revision reflects growing demand and aligns with broader forex liberalization efforts.
(This news has been updated)
