Nepal Slashes Policy Rate to 4.5% to Accelerate Credit and Growth
Nepal Rastra Bank cuts policy rate from 5% to 4.5% amid record forex reserves, aiming for 13% money supply and 12% credit growth in FY 2025/26.
KATHMANDU, JULY 15 — In a strategic policy shift to reignite lending and investment, Nepal Rastra Bank (NRB) on Friday cut its benchmark policy rate to 4.5% from 5%, marking a significant turn toward monetary easing amid surging foreign exchange reserves.
Governor Biswo Nath Poudel, unveiling the monetary policy for FY 2025/26, announced an ambitious roadmap to support 6% GDP growth, expand the broad money supply by 13%, and fuel 12% credit growth—with inflation targeted around 5%.
The interest rate corridor has been narrowed:
Upper limit (Bank Rate): 6.5% ➝ 6%
Lower limit (Deposit Rate): 3% ➝ 2.75%
With Rs 2.56 trillion in foreign reserves, the move is seen as a calculated step to convert surplus liquidity into productive credit.
New incentives include:
Housing loan ceiling raised to Rs 30 million
Loan-to-value ratio for first-time buyers up to 80%
Crop-based loans up to Rs 1 million without third-party valuation
Rs 30 million SME loan scheme for certified hotels/restaurants
Margin-type share loan limit hiked to Rs 250 million
The policy eases rural, agriculture, and digital banking access—aligning KYC with National ID integration, reducing red tape and enabling shared digital customer records.
Moreover, NRB plans to adopt risk-based supervision, expand convertible currency options, and implement the Second Financial Sector Strategy for long-term reforms.
Experts welcomed the liberal stance but stressed the importance of swift execution to avoid policy fatigue and ensure institutional accountability.