Kathmandu. KATHMANDU: Nepal Rastra Bank (NRB) has released the Monetary Policy for the fiscal year 2083/84 BS. Governor of Nepal Rastra Bank (NRB) Bishwanath Poudel has unveiled the Monetary Policy for the upcoming 60th Monetary Policy on Tuesday. In the fiscal year 2083/84, credit to the private sector is projected to expand by 11 percent and broad money will increase by 14 percent.
Here is the full text of the monetary policy for the fiscal year 2083/84
The bank has been releasing the monetary policy since the fiscal year 2059÷60 in line with the Nepal Rastra Bank Act, 2058 BS to achieve its objectives. In this context, the monetary policy for the fiscal year 2083÷84 is the twenty-fifth.
2. While making the Monetary Policy public, the review report of the Monetary Policy for the fiscal year 2082÷83, which provides for the provision of Section 94 of the Nepal Rastra Bank Act, 2058 BS, has been started to be made public in the form of a separate report on the review and evaluation of the policies adopted and implemented in the previous year and the justification of the policy to be adopted and implemented in the coming year. The new structure has been introduced to make public the basis of the monetary policy to be issued by the bank and the detailed analysis of the implementation of the monetary policy.
3. Supply disruptions caused by tensions in global geopolitics are putting pressure on global economic growth and inflation. At the same time, some central banks have raised interest rates and taken a tighter monetary stance, while most have kept their policy stance neutral.
The government has set a target of 7.0 percent economic growth in the fiscal year 2083÷84. Looking at the past trends, although the economic growth target seems high in the status quo, the estimated economic growth rate can be achieved if the economic reform programs initiated by the Government of Nepal improve the investment environment in the private sector, increase the capacity of the government to spend capital and the external economic situation is favorable.
5. Inflationary pressures are increasing due to external supply, while expansion in domestic demand is also expected to put some pressure on inflation. The average inflation in the 10-month period of the current fiscal year was only 2.66 percent but the year-on-year inflation in April 2008 was 5.04 percent. Inflationary pressures will continue for a few more months due to the rise in the prices of petroleum products and food items due to supply-related reasons, but inflation is expected to ÷remain within 5.5 percent in the fourth quarter of the next fiscal year, with inflation expected to ease from the fourth quarter of the next fiscal year.
6. The liquidity and interest rate situation in the monetary sector will help in the expansion of the economy. As the fiscal policy has proposed to expand public spending, cut income tax and economic reforms, it is expected that liquidity will be consumed as the aggregate demand increases and the overall economic activity expands. However, the challenges in liquidity management are expected to persist due to additional liquidity flow from remittance inflow, tourism income, public expenditure, etc.
7. The indicators of financial stability of the entire banks and financial institutions are satisfactory. However, due to the increasing number of non-performing loans in some institutions in recent times and the pressure on the capital fund due to this, intensive monitoring is necessary.
8. Although the import is seen to increase along with the economic activities, the remittance inflow is expected to remain high and the current account and balance of payment will remain in surplus due to the expansion of service exports including tourism.
9. The monetary policy for the fiscal year 2083÷84 has been prepared on the basis of this scenario. The economic scenario with inflation and economic growth projections by analyzing the macroeconomic economy is presented in the Macroeconomic Report, July 2026.
10. Although there is some pressure in inflation due to external pressures, it is expected to ease gradually. At present, the situation of foreign exchange reserves is convenient and the macroeconomic scenario is favourable, so to support the goal of high economic growth, the morale of the private sector by maintaining a low-cost economy has been continued with the cautiously flexible line taken earlier.
11. Monetary liquidity and foreign exchange will be managed to achieve 7.0 percent economic growth by maintaining inflation of around 5.5 percent in the fiscal year 2083÷84 and sufficient foreign exchange reserves to sustain the import of goods and services for at least seven months.
12. The stable exchange rate of the Nepali rupee against the Indian rupee has been taken as a curb of the monetary policy and it has been kept unchanged as an interim goal.
13. Open market transactions will be conducted in such a way that the interbank rate will be maintained at par with the policy rate by keeping the weighted average interbank rate of the banks and financial institutions which is the operation goal of the monetary policy. For this, depending on the nature of liquidity, different duration instruments will be used for structural liquidity and regular and contingent liquidity management.
14. The policy rate, fixed deposit facility rate and bank rate under the interest rate corridor have been kept unchanged.
15. The existing provisions relating to mandatory cash ratio, statutory liquidity ratio and permanent liquidity facility have been continued.
16. In order to facilitate the liquidity flow management through the purchase of foreign currency, commercial banks will be encouraged to invest in foreign government bonds and sterilized interventions will be made at the time of purchase of foreign currency.
17. The practice of using macroprudential regulatory tools will continue on the basis of the experience that monetary policy alone is insufficient to mitigate such risks in the event that there are signs of systemic risk in any sector of the economy.
18. In order to make the dissemination of the monetary policy more effective, the policy will be adopted to improve the quality of services received by the consumers by reforming the financial sector and reducing the financial cost through the branch management and digitization of the banks and financial institutions.
19. Regulatory provisions will be gradually implemented to encourage banks, financial institutions and non-bank financial institutions to expand their services in the targeted areas after completing the ongoing study on the classification of banks and financial institutions.
20. Special policy provisions will be made to remove the situation of creating unlimited liability from personal guarantee as a security of loans, to reduce the obstruction in access to banking services due to blacklisting due to cheque dishonor, to manage the non-performing loans in sick industries, to revive the loans under pressure, to set the limit of share mortgage loan on the basis of the strength of the institution and to ease the loan-to-value ratio of large electric vehicles used as public vehicles ।
21. The directives issued to banks and financial institutions will be simplified by removing linguistic complexities and duplication to emphasize simplified regulation and strong supervisory functions. In the first phase, the directives related to credit flow, interest rates and financial customer protection will be rewritten.
22. The integrated circular issued by the bank to the institutions carrying out foreign exchange transactions will be simplified by facilitating the existing arrangement of foreign exchange exchange.
23. A study will be conducted on the conduct of the Evacuate transaction based on the individual credit scoring system.
24. The programmes related to Yes Bank mentioned in the national commitments, one hundred agendas related to governance reforms and the budget statement will be gradually implemented in coordination with the bodies concerned.
25. Although there is some pressure on inflation due to external pressures, it is expected to ease from next month. As inflationary pressures are expected to ease gradually, the overall price situation next year is likely to remain within the range projected by the Bank.
26. If inflationary pressures increase, if the public and private sectors are unable to reap the expected benefits from a low-cost economy with sufficient liquidity, and if challenges to macroeconomic stability are seen, the monetary policy line will be reviewed and the existing interest rate corridor will be gradually narrowed as needed.
27. The comprehensive prudential regulatory tools adopted by the bank will be taken as a policy not to be modified except in exaggerated cases. This is expected to maintain policy stability and manage market expectations.
The monetary policy was introduced from 2023 BS. It started from the fiscal year 2059/60 BS to bring it from the governor.
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