Monetary Policy is positive and balanced: FNCCI, NICCI

 Kathmandu, July 8

The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has termed the monetary policy for the upcoming Fiscal Year 2026/27 as 'positive and balanced', and said it would help boost the confidence of the private sector.

"The policy seeks to maintain a balance between price stability, financial sector stability and higher economic growth at a time when the country's economy is gradually improving," the business body said about the policy unveiled by the Nepal Rastra Bank (NRB) on Tuesday.

It said the policy recognises the decisive role of the private sector in achieving the government's target of 7 per cent economic growth as announced in the budget for the next year.

FNCCI President Anjan Shrestha said the flexible policy measures aimed at expanding private sector investment, increasing production, creating employment and stimulating economic activities were appropriate.

According to the FNCCI, several issues that it had been raising for a long time had been addressed in the policy. These include measures to remove unlimited liabilities arising from personal guarantees, manage non-performing loans of sick industries and revive stressed loans.

It also welcomed provisions to determine share-backed lending limits based on institutional capacity and to facilitate lending for large electric vehicles used in public transportation.

However, FNCCI stressed that the upcoming directives should clearly address the restructuring and rescheduling of loans for small, medium and large businesses, as well as sector-specific lending.

Likewise, the decision to keep the policy rate, standing deposit facility rate, bank rate, cash reserve ratio, statutory liquidity ratio and standing liquidity facility unchanged would help maintain policy stability, read the statement.

"The NRB's projection of a strong external sector, supported by adequate foreign exchange reserves, remittance inflows, tourism income and growth in service exports, would help stimulate the domestic economy," said the FNCCI.

However, it maintained that the success of the monetary policy would depend on its effective implementation. It called for easier and affordable credit flow to industry, agriculture, tourism, energy, information technology, infrastructure, export-oriented industries and small and medium enterprises to achieve the 11 per cent credit growth target and utilise excess liquidity in the banking system.

It further called for a more flexible approach towards loan classification and loan-loss provisioning, a two-year relaxation of watch-list and blacklisting provisions.

Meanwhile, Nepal-India Chamber of Commerce & Industry (NICCI) appreciated the Monetary Policy as the continuation of a cautiously accommodative monetary policy aimed at supporting higher economic growth while maintaining macroeconomic stability.

It welcomed the decision to maintain policy rates, continue the existing Interest Rate Corridor, preserve adequate liquidity in the banking system and maintain exchange rate stability with the Indian Rupee. "These measures are expected to sustain business confidence and create a more predictable investment environment," NICCI said in a statement.

It said that although the banking system currently possesses ample liquidity and historically low lending rates, private sector credit expansion remains relatively subdued. This indicates that the principal constraints are no longer the availability or cost of finance, but rather investor confidence, policy predictability, project readiness, regulatory bottlenecks and the pace of implementation of economic reforms, read the statement. 

Published in The Rising Nepal daily on 9 July 2026.       

NRB slashes rates, promotes housing and share market growth

 Monetary Policy 2025/26

 

Kathmandu, July 11

The Nepal Rastra Bank (NRB) unveiled the Monetary Policy for the upcoming Fiscal Year 2025/26 on Friday with measures to expand private sector credit, manage non-performing loans (NPLs) and non-banking assets, and promote the share market.

Amidst growing liquidity in the Banks and Financial Institutions (BFIs), the NRB has announced to adjust the bank rate from 6.5 per cent to 6 per cent and deposit collection rate to 2.75 per cent from the existing 3 per cent. Likewise, the policy rate is dropped to 4.5 per cent from the current 5 per cent, Governor of the NRB, Dr. Biswo Nath Poudel said while unveiling the Monetary Policy.  

Lowered bank rate facilitates easier borrowing from banks, while the decreased policy rate reduces the cost of credit in the economy. Adjustment in deposit rate means less incentive to save and more incentive to invest or spend. Combined, these steps can result in more liquidity in the market, higher demand and inflation.

However, the central bank is confident that these steps will help in encouraging banks to lend more to businesses and individuals, reduce lending rates, and make the home, business and personal loans cheaper, and there wouldn't be the risk of high inflation.

"The inflation rate is a very comfortable position in mid-May to mid-June at 2.72 per cent compared to 4.17 per cent during the same period last year. Since there is room for some inflation, the interest rate moderation will not disturb this harmony and significantly push the prices up," NRB Spokesperson Kiran Pandit said at a post-Monetary Policy press meet held at the central bank on Friday.

He said that the interest rate corridor has been moderately brought down to boost economic activities and help the market become more vibrant.

Likewise, the NRB has adopted a flexible policy in real estate lending, with the maximum limit for residential home loans granted to individuals for purchasing a house increased to Rs. 30 million from the existing Rs. 20 million.

For first-time homebuyers, banks will now be allowed to provide residential loans of up to 80 per cent of the property’s assessed value, up from the earlier cap of 70 per cent.

Similarly, the loan-to-value ratio for land and property purchases has also been increased to allow the BFIs to finance up to 70 per cent of the assessed value. Currently, they are permitted to lend up to 50 per cent.

 

Margin lending limit raised

Governor Dr. Poudel has increased the limit on margin lending. The ceiling of Rs. 150 million for personal share-backed loans has now been raised to Rs. 250 million. With the implementation of this provision, individuals can now obtain loans of up to Rs. 250 million in total from various banks and financial institutions by pledging shares as collateral. This measure, combined with the decreased interest rates, can drive a share market growth.

Likewise, the cap on deposit mobilisation for finance companies has been removed, allowing them to mobilise deposits beyond the current provision of 15 times their core capital. It is likely to attract more deposits to the finance companies and have a positive impact on the prices of their shares.

The NRB has also indicated that the microfinance companies can distribute dividends above the current limit of 15 per cent from their profits. This will also take the share prices of the class 'D' microfinance institutions up in the days to come.

 

Capital increase for commercial banks

Commercial banks will now be allowed to increase their capital with the approval of the central bank. The BFIs will be permitted to count the regulatory reserves generated from non-banking assets held for up to two years towards their supplementary capital.

The Governor announced that the new monetary policy aims to strengthen the capital base of banks further. However, the banks should obtain approval from the central bank for the capital increment plan.

Likewise, necessary arrangements will be made for the effective implementation of the concessional loan mentioned in the government's budget statement for the fiscal year 2025/26.

"Laws and regulations will be drafted and submitted to the government to allow BFIs to establish asset management companies for the purpose of managing their non-performing assets. Process would be initiated to establish a Neo Bank with an aim to expand the financial inclusion as envisioned by the budget of the government," read the Policy.

 

Loan to migrant workers to be 'deprived sector'

It announced a new provision would be made to count the loan (with or without collateral) up to Rs. 300,000 mobilised to youth going for foreign employment as 'deprived sector lending'. Such an amount for women going for jobs abroad could be up to Rs. 500,000.

Likewise, standards on target groups, loan receiving and creditors' qualifications for microfinance institutions would be reviewed.

The amount of foreign currency that Nepali citizens are allowed to carry while travelling abroad has been increased to USD 3,000.

The central bank will launch a new programme titled 'Nepal Rastra Bank with Borrowers' with an aim to listen to borrowers' grievances. This initiative will be implemented particularly in the rural areas to engage continuously with borrowers.

According to Governor Dr. Poudel, the NRB will coordinate with relevant government agencies to address risks arising from undesirable activities encountered when banks and financial institutions carry out loan recovery or regularise loans in accordance with existing legal procedures.

 

Concession to mid-hill businesses

In a new move, the central bank has announced a concessional loan to the businesses along the Mid-Hill Highway and Postal Highway at a base rate plus 2 per cent interest rate. However, to get this facility, the businesses must be registered with the government and met all quality standards prescribed.

Similarly, BFIs would be allowed to mobilise agriculture or business loans of up to Rs. 1 million by evaluating agriculture yield, land and business structure by themselves.

Speaking at the press meet, Executive Director of the NRB, Guru Prasad Poudel, said that the mid-hill region could not contribute to the economic activities as expected so the new measures were announced to increase business activities there. 

Published in The Rising Nepal daily on 12 July 2025.   

FNCCI calls for monetary policy to boost private sector, revitalise economy

Kathmandu, July 8

The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has emphasised the need for policy reforms to address the prevailing economic slowdown, risks in the financial sector, and the large share of the informal economy.

The aim is to revitalise the recovering economy, boost private sector confidence, and address risks related to anti-money laundering compliance, it said in its recommendations to Nepal Rastra Bank (NRB) for the Monetary Policy for Fiscal Year 2025/26.

Stating that poor governance and lack of infrastructure have hindered the effectiveness of policy reforms, the FNCCI called for a monetary strategy targeted towards infrastructure development.

A FNCCI delegation led by Acting President Anjan Shrestha, submitted these suggestions to NRB Governor Biswo Nath Poudel on Tuesday.

The federation urged the inclusion of concrete programmes to implement the credit restructuring and rescheduling provisions outlined in the budget for the FY 2025/26, to ensure the facility is accessible to small, medium, and large businesses alike. It further recommended clear and effective implementation of additional working capital provisions and interest penalties waivers.

FNCCI also stressed the need to facilitate easy access to working capital loans for productive sectors, tourism, construction, and housing development companies. It recommended that banks and borrowers be given the authority to decide on working capital loans based on nature of business.

Likewise, citing the decline of the industrial sector’s share in GDP to 12.4 per cent, it proposed that interest rates for industrial loans should be 1–2 per cent lower than that for trade.

Regarding Nepal's upcoming graduation from LDC status in 2026, FNCCI proposed concessional financing policies to sustain the competitiveness of micro, cottage, small, and women-led export-oriented enterprises. It also suggested linking women entrepreneurship loans to production and managing interest subsidies, as well as capping premium rates at 2 per cent for loans up to Rs. 50 million.

Furthermore, FNCCI called for flexibility in the watchlist provisions, and to attract Gen Z into entrepreneurship, it recommended facilitating business registration via the Nagarik App and offering project loans of up to Rs. 10 million. It also urged the implementation of FNCCI’s feasibility study in this regard.

Similarly, it proposed concessional loans for families of migrant workers who send remittances formally while still abroad. It recommended revising the current targeted lending policy to prioritise productive industries, tourism, and infrastructure, and called for the establishment of an asset management company in response to the growing volume of non-performing assets in banks and financial institutions.

Highlighting the prohibition on domestic remittances via remittance companies, FNCCI noted that this policy adversely affects low-income groups, students, informal workers, and those without access to bank accounts or smartphones, especially in remote areas. It recommended allowing internal transfers of up to Rs. 100,000 through remittance companies based on valid ID, equivalent to international cash payouts.

Additional recommendations include increasing the housing loan limit from Rs. 20 million to Rs. 30 million, linking KYC requirements to the National Identity Card to enable electronic access by relevant agencies, and implementing free interoperability for QR payments.

Regarding foreign investments, FNCCI suggested effective implementation of the budget provision allowing Nepali businesses to open sales branches or processing plants abroad and to invest up to 25 per cent of total exports. It also proposed that the monetary policy clarify the provision allowing Nepali citizens to receive sweat equity shares in return for providing technology or specialised services to foreign companies.

Published in The Rising Nepal daily on 9 July 2025.   

CIM suggest easing terms for restructured loans

Kathmandu, June 25

Raising concerns over the rigid framework around loan restructuring and reclassification, the Chamber of Industries Morang (CIM) recommended the Nepal Rastra Bank (NRB) to ease current provision so that restructured loans can be classified under 'watchlist' status rather than being mandatorily labelled as non-performing assets (NPA).

It demanded that the provisioning requirements should be brough down to 5 per cent if 15 per cent interest is paid.

As Nepal Rastra Bank (NRB) prepares to unveil its monetary policy for the upcoming fiscal year 2025/26, the CIM has submitted an 18-point recommendation urging the central bank to adopt bold, flexible, and forward-looking reforms to address mounting economic challenges facing the industrial and business community.

Presenting the suggestions on behalf of the Chamber, President Nand Kishor Rathi stressed that the country’s private sector, particularly small, medium, and large-scale industries, is struggling with liquidity shortages, market contraction, debt repayment pressures, and regulatory inflexibility.

He said that these constraints have significantly impacted production, investment, and employment in the industrial heartland of eastern Nepal.

The CIM also called for increasing the working capital loan limit from the current 50 per cent to at least 70–80 per cent of the total working capital requirement, citing extended credit cycles now lasting beyond 180 days due to sluggish sales and collections.

It also demanded the establishment of mechanisms to regulate and safeguard credit-based transactions in the private sector. With no official oversight, businesses are at high risk of loss when credit remains unpaid.

The Chamber suggested that the NRB allow financial institutions to report defaulters to credit bureaus and recommends mandatory annual audit submissions to the local revenue offices.

The organisation has further called for extending the payment period of import-related usance letters of credit (LCs) from 90 to 180 days, in line with current international trading conditions, and for increasing the loan-to-collateral ratio from 50 per cent to 80 per cent to facilitate access to financing.

The CIM has strongly pushed for the implementation of the long-awaited Asset Management Company as previously proposed in monetary policy but never actualised due to lack of enabling legislation. It argued that such a mechanism is now urgent to revive stalled industrial projects and mitigate systemic banking risk.

It has also proposed institutionalising Business Development Services (BDS) in each province, offering start-ups and SMEs streamlined support in licensing, legal, technical, and financial advisory services.

The business community of Morang urged NRB to clarify policies regarding the use of these services and promote investment in private equity and venture capital (PEVC), which remains constrained by current monetary restrictions.

In a bid to reduce credit risk and promote domestic production, the CIM has sought relaxed risk weightage and provisioning norms for loans issued to production-based and agri-processing industries that use local raw materials. "Such support could reduce the country’s trade deficit and support returnee migrant workers in establishing enterprises at home," read the suggestions.

Stating that with interest rates, liquidity levels, and credit policy frequently changing, the private sector finds it difficult to make medium-term financial forecasts, the CIM called for more predictable financial regulation, with sufficient transition periods and stable interest rates, especially for productive sector loans, for at least five years.

Likewise, it recommended harmonising loan documentation practices across financial institutions. Despite having similar loan types, banks currently require different paperwork, creating legal and administrative hurdles for businesses.

Published in The Rising Nepal daily on 26 June 2025. 

‘Monetary police should support real sector’

Kathmandu, June 20

Prakash Kumar Shrestha, a member of the National Planning Commission (NPC), stressed the need for a monetary policy that supports the expansion of the real sector.

Speaking at the two-day ‘Advanced Banking Training for Economic Journalists’ organised by Nepal Association of Financial Journalists (NAFIJ) with the support of Nabil Bank in Kathmandu on Friday, Dr. Shrestha said that expansion of the real sector is essential for economic prosperity.

He noted that the banking sector has also begun to feel the effects of the ongoing economic slowdown. “The inability to expand the real sector has started affecting the banking sector as well. Therefore, the real sector needs to be further expanded,” said Dr. Shrestha.

He emphasised that the forthcoming monetary policy for the Fiscal Year 2025/26 should be designed to stimulate credit demand.

“Currently, banks still have approximately Rs. 700 billion in lendable funds. The new monetary policy should be introduced in a way that boosts credit demand,” he said. He added that if the industrial sector becomes more active, credit demand would naturally increase.

The Nepal Rastra Bank (NRB) is currently preparing to formulate the monetary policy for the upcoming fiscal year. Dr. Shrestha suggested that the policy should facilitate greater credit access for enterprises.

He also pointed out that insufficient government spending has suppressed domestic borrowing demand. Highlighting the disruption in the government’s spending cycle, he suggested that the government needs to improve its fiscal spending and increase domestic borrowing accordingly.

Likewise, Deputy Governor of the NRB, Bam Bahadur Mishra, highlighted the growing need for accurate information, stating that since the economic and financial sectors are highly sensitive, reporting must be based on correct information.

“The challenge now is to disseminate correct information in society without spreading misinformation,” he said, advising journalists to base their reports on facts and truth.

Given the sensitivity of the banking sector and how quickly misinformation can have an impact, Mishra urged journalists to communicate only accurate information. He said that since the financial sector plays a critical role in the economy, any misinformation affecting it could have a negative impact on the overall economy.

Published in The Rising Nepal daily on 21 June 2025. 

Risk weight for margin lending to be dropped to 100%

Kathmandu, May 25

The Nepal Rastra Bank (NRB) has said that the existing risk weight for margin lending (loan against shares) would be reduced from 125 per cent to 100 per cent.

The central bank has pledged this policy amendment in the third quarterly review of the Monetary Policy of the current Fiscal Year 2024/25 published on Sunday.

Considering the liquidity situation in the financial system and reforms made by the central banks in the tools used in open market operations, arrangements would be made for financial institutions to maintain a daily minimum cash reserve of 90 per cent of their total deposits and other financial resources.

The current provisions regarding mandatory cash reserves and statutory liquidity arrangements have been maintained.

Likewise, the existing lower and upper limits of interest rate corridor – 3.0 per cent for deposits and 6.5 per cent for bank rate – as well as 5.0 per cent policy rate is kept intact.

The NRB also said in the review that with the aim of improving the investment climate, provisions including the Foreign Exchange (Regulated) Act, 2074 and the Foreign Investment and Technology Transfer Act, 2075, along with subsequent amendments, have been incorporated to issue 'Nepal Rastra Bank Foreign Investment and Foreign Loan Management Bylaws, 2078'.

"Work is being carried out to formulate a policy framework to criminalise cheque bouncing under the Banking Offence and Punishment Act, 2064," read the report.

To maintain inflation within the desired range of 5 per cent, the monetary policy aimed to control the expansion of money supply. As a result, as of nine months, consumer price inflation stands at 4.57 per cent, said the NRB.

"The current account remains in surplus due to a significant increase in foreign exchange remittances. As of nine months, the forex reserves are sufficient to cover the import of goods and services for 14.2 months," read the report. 

Published in The Rising Nepal daily on 26 May 2025. 

Stakeholders urge to fill the regulation void in microfinance and cooperatives

 Kathmandu, June 15

Stakeholders have suggested for a strict regulation of microfinance and cooperatives sector in order to check the financial anarchy and embezzlement of the hard-earned money of people.

Indicating to a partial void in regulation in microfinance and lack of rein to tame cooperatives for the past many years, they said that the recent events including loan duplication in microfinance, and misuse and personal use of public money deposited in savings and credit cooperatives could erode the trust of people on the entire financial sector.

Speaking at a discussion programme on Monetary Policy for the Fiscal Year 2023/24 organised by the Management Association of Nepal (MAN) in the Capital on Thursday, they indicated to the urgent need of second-tier regulator to supervise and monitor cooperatives.

Budget for the next FY has also promised to form a second-tier institution to address the problems in the cooperative sector.

Economist Dr. Resham BahadurThapa, suggested that the microfinance and cooperatives shouldn't be left unmanaged and in anarchic state. According to him, innovative measures were needed to address the challenges seen in these sectors.

 

Need for second-tier regulator

Minraj Kandel, President of National Cooperatives Federation, suggested immediately establishing second-tier institution to monitor and supervise cooperatives.

According to him, various provisions of the cooperatives act such as credit information centre have not been implemented. "Agricultural cooperatives should be provided with soft loan to promote production and it should be included in the monetary policy of the next fiscal," he said.

However, Dr. Yuba Raj Khatiwada, former Minister for Finance and former Governor of the NRB, said that the cooperatives sector should not be brought under the jurisdiction of NRB's regulation.

He also suggested for a special institution which could be second-tier regulator to regulate the cooperatives sector. "The central bank can help and facilitate this institution in better regulating and monitoring the cooperatives sector," said Dr. Khatiwada who is also the former President of MAN.

He expressed worries that the microfinance sector is left unregulated and unsupervised, and suggested for immediate actions from the banking sector regulators. Microfinance institutions in Nepal have the responsibility of supporting the ultra-poor in livelihood options and thus help in poverty alleviation. They are facilitated with the concessional loans from the class 'A', 'B' and 'C' banks and financial institutions.

 

Support agriculture

Dipendra Bahadur Kshetri, Former Governor of the central bank and former Vice-Chairman of the National Planning Commission (NPC), suggested the NRB to establish a unit to estimate the need of fund needed to be invested in agriculture's various sub-sectors like paddy, maize, pulses and cash crops.

"This would be an important step as it would help to make the economy self-sufficient in some of the agricultural produces," he said while adding that the bank loan on agriculture should reach the farmers/producers in Nepal, not the traders.

 

NRB studying microfinance status

In response, Governor of the NRB, Maha Prasad Adhikari, informed that to address the maladies in the microfinance sector, a committee formed by the central bank is studying the situation. The committee will also offer recommendations to improve the situation.

"The wrongdoers will be punished but blaming the entire microfinance sector is not appropriate. It has empowered women and uplifted ultra-poor population," he said.

Governor Adhikari maintained that it is the responsibility of the central bank to regulate and monitor the sector.

Stating that financial transactions in savings and credit cooperatives are still out of supervision, he expressed worries that if there is a run in cooperatives, no one can control the crisis.

"We feel that the root cause is the investment in real estate," he said.

 

 Banks are over-capitalised

Dr. Khatiwada said that the banks in Nepal are already over-capitalised in comparison to the size of the national GDP, and suggested the BFIs not to increase the capital base as they are already in comfortable situation.

"Give priority to income generation, not asset accumulation, loan mobilisation in speculative business areas should be controlled," he said while adding that it wouldn't be wrong to allow diluting 10 per cent of promoter's shares, with the condition of barring the businesspersons from buying them.

Dr. Khatiwada suggested bringing the spread rate below 4 per cent, not allowing the BFIs to create cartel in determining interest rates. He also said that the NRB should be worried about the inflation rate not the loan mobilisation rate.

Stating that the government has set the limit of bonds in the budget which should be left to the decision of the central bank, he maintained that the government must not try to micro-manage the central bank.

 

'Implement digital currency'

Dipendra Purush Dhakal, Former Governor of the NRB, said that the upcoming monetary policy should be tight as well as facilitative so that it could support the domestic production and business and check the import of unwanted and luxury goods.

He said that merger policy for banks and financial institutions (BFIs) should be continued to reduce their numbers.

According to him, common digital currency should be created and implemented within a year from now. It is necessary to develop the financial sector on a par with neighbouring India.

President of Hotel Association of Nepal, Binayak Shah, said that tourists should be allowed to make their local payments to hotels in local currency.

Bangladeshi and Sri Lankan tourists should be provided with the facility to exchange their national currency in Nepal's local currency. It will be massive help to attract more tourists from the neighbourhood and abroad, he said.

Gyanendra Dhungana, former President of Nepal Bankers' Association, said that BFIs are still unable to meet the target of special sector loan such as the small and medium enterprises (SMEs), and they might need an extension of time to implement this provision.

Similarly, Kamlesh Kumar Agrawal, Senior Vice-President of Nepal Chamber of Commerce, demanded an expansionary monetary policy to protect the private sector.

"Current trend of high interest rate wouldn't support the expected growth in the economy. So, the spread rate should be brought down to 3.5 per cent," he said.

Anal Raj Bhattarai, coordinator of Banking Committee at the Confederation of Nepalese Industries, said that monetary policy should be formulated keeping in mind the constraints and demands of a least developed and landlocked nature of the country.

 Published in The Rising Nepal daily on 16 June 2023.