The Nepal Rastra Bank has reduced key interest rates in its first quarterly review of the monetary policy for fiscal year 2025/26.
The policy rate has been cut to 4.25 percent, down from 4.5 percent set at the start of the fiscal year in mid-July.
While the Standing Liquidity Facility (SLF) rate has been lowered to 5.75 percent from 6 percent, the Standing Deposit Facility (SDF) rate remains unchanged at 2.75 percent, according to the review released on Monday, December 1.
The SLF, policy and SDF rates form the upper, middle and lower bands of the central bank’s interest rate corridor.
The NRB provides liquidity to banks and financial institutions at the policy and SLF rates when they face shortfalls. With both rates now reduced, commercial banks are expected to come under greater pressure to lower their lending rates.
The central bank has kept the SDF rate unchanged to prevent deposit rates from falling further. The banking system currently holds excess liquidity, which the NRB has been absorbing through its deposit collection instruments.
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