Monetary Policy for FY 2082/83 Unveiled: Major Highlights
July 11, 2025 | Investopaper
Nepal Rastra Bank (NRB) has rolled out its monetary policy for the upcoming fiscal year, adopting a cautious yet adaptable approach to foster economic growth while maintaining financial stability. Governor Dr. Bishwanath Paudel announced the policy through a live broadcast marking his first monetary policy unveiling since taking office.
Key Objectives: Economic Growth and Inflation Control
The monetary policy aims to support the government’s ambitious target of achieving 6% economic growth. To ensure this, the central bank has set a goal to maintain foreign exchange reserves sufficient to cover seven months of goods and services imports. Additionally, NRB is committed to keeping inflation within a 5% ceiling, a critical measure to stabilize the cost of living and safeguard purchasing power.
Governor Paudel emphasized that the policy is designed to boost aggregate demand while preventing negative interest rates on deposits. This balance is intended to encourage investment and consumption without compromising the financial sector’s stability.
Monetary Expansion and Credit Growth
To achieve the economic growth target, NRB projects a broad money supply expansion of 13% and a 12% increase in private sector credit. These measures are expected to stimulate economic activity by ensuring liquidity in the market and encouraging lending to businesses and individuals.
Adjustments to Policy Rates
The monetary policy introduces notable changes to key interest rates:
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The bank rate, which serves as the upper limit of the interest rate corridor, has been reduced from 6.5% to 6%.
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The policy rate has been lowered from 5% to 4.5%.
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The deposit collection rate has been adjusted downward from 3% to 2.75%.
However, the mandatory cash reserve ratio and statutory liquidity ratio for banks remain unchanged.
Housing and Share-Backed Loans
In a move to make housing more accessible, NRB has increased the loan-to-value ratio for home loans to 80%, with the maximum loan ceiling raised from Rs. 2 crores to Rs. 3 crores. This adjustment is expected to provide greater flexibility for prospective homeowners, particularly in urban areas where property prices have surged.
Similarly, the ceiling for share-backed loans has been significantly raised from Rs. 15 crores to Rs. 25 crores. This change aims to unlock additional liquidity for investors, potentially boosting activity in Nepal’s stock market.
A Balanced Approach Amid Economic Challenges
Governor Paudel’s policy reflects a strategic blend of prudence and flexibility, addressing the dual challenges of stimulating growth and maintaining macroeconomic stability. By lowering key interest rates and expanding loan limits, NRB seeks to create an enabling environment for businesses and consumers. At the same time, its focus on maintaining adequate foreign reserves and controlling inflation underscores a commitment to long-term economic resilience.
This monetary policy sets the stage for cautious optimism. Stakeholders across sectors will be closely watching how these measures translate into tangible economic outcomes in the coming fiscal year.
