KATHMANDU: Nepal Rastra Bank (NRB) has adopted a flexible monetary policy and released the first quarterly review of the monetary policy for the fiscal year 2082/83.

According to the review, the central bank has reduced the interest rate corridor and increased the limits for personal and microfinance loans.

The policy aims to maintain the policy rate at the midpoint of the corridor by narrowing the gap between the lower and upper limits of the interest rate corridor.

The standing liquidity facility rate, which represents the upper limit, has been reduced from 6.00% to 5.75%, and the policy rate has been lowered from 4.50% to 4.25%, NRB stated.

The standing deposit facility rate, representing the corridor’s lower limit, remains unchanged at 2.75%.

The existing arrangements for mandatory cash reserve and statutory liquidity ratios have also been maintained.

The review also abolishes the existing rule requiring banks and financial institutions to offer institutional term deposit rates at least 1% lower than personal term deposit rates.

Additionally, the limit for individual overdraft loans provided by banks and financial institutions has been increased from Rs 5 million to Rs 10 million.

For microfinance institutions, the maximum loan limit against collateral has been raised from Rs 700,000 to Rs 1.5 million.

Borrowers facing repayment difficulties may have their repayment schedules revised. Banks and financial institutions can also restructure or reschedule loans for businesses in districts affected by recent floods and landslides, including Ilam, by charging a minimum 10% interest.

NRB’s report stated that the government, formed after the Jenji movement, has strengthened governance and implemented policies conducive to a business-friendly environment.

The central bank’s accommodative monetary measures are expected to gradually strengthen the economy. Fitch Ratings recently reaffirmed Nepal’s sovereign credit rating at BB–.

Despite some damage to hotels during the Jenji movement, Nepal’s peace and security have reassured tourists, leading to an increase in foreign arrivals. According to the Nepal Tourism Board, 941,000 foreign tourists visited Nepal in the first ten months of 2024, compared to 944,000 during the same period in 2025.

Hydropower generation has progressed, with an additional 309.2 MW connected to the national transmission line in the first quarter of fiscal year 2082/83.

The government’s focus on controlling current expenditure while prioritizing ongoing and high-priority projects, along with reconstruction of damaged infrastructure, is expected to have a positive impact on the economy.

However, delayed monsoon and heavy intermittent rainfall during the rice planting season have affected agriculture and other sectors.

As a result, preliminary estimates suggest that economic growth for the current fiscal year may fall slightly short of the target.

NRB noted that consumer inflation in India has remained below target in recent months, with the Reserve Bank of India projecting inflation at 2.6% in fiscal year 2025/26.

International petroleum prices are expected to ease.

Domestically, slightly lower production of rice and other seasonal crops, combined with election-related spending, may exert some inflationary pressure. Accordingly, the average consumer inflation for fiscal year 2082/83 is projected to remain around 4.0%.

The number of Nepali workers going abroad continues to rise. If remittance inflows remain consistent relative to imports, the foreign exchange reserve is expected to stay at a comfortable level for the rest of the fiscal year.

NRB stated that liquidity in the banking sector remains ample, with low interest rates maintained.

The weighted average interest rates on deposits and loans have been continuously declining, though the weighted average real deposit rate remains positive.

While the ratio of non-performing loans in banks and financial institutions is increasing, the average capital adequacy ratio continues to exceed the prescribed minimum.