NRB’s expansionary Monetary Policy expected to revive Nepal’s stock market and real estate

KATHMANDU: The newly unveiled monetary policy for the fiscal year 2082/83 (2025/26) by Nepal Rastra Bank (NRB) is expected to inject optimism into the share market and real estate sector through structural reforms, increased credit limits, and lower interest rates. Governor Dr. Bishwanath Paudel, presenting his first monetary policy on Friday, announced a series of market-friendly provisions aimed at stimulating investment and restoring investor confidence.

The central bank has raised the maximum loan limit for residential housing from Rs 20 million to Rs 30 million, while increasing the Loan-to-Value (LTV) ratio from 70% to 80% for first-time homebuyers. This change allows buyers to contribute a smaller down payment while accessing larger financing from banks — a move designed to revitalize Nepal’s stagnant housing market.

Share Mortgage Loan Limit Raised to Rs 250 Million

In a significant boost for capital market investors, the share-backed loan limit has been increased from Rs 150 million to Rs 250 million for individuals under a single household. This is expected to boost leverage-based investments in the stock market, especially amid a cautiously improving NEPSE index.

Previously, former Governor Maha Prasad Adhikari had raised the share loan limit to Rs 150 million. Governor Paudel has now gone a step further, offering greater credit flexibility to investors and traders, aligning with the broader goal of financial market development.

Interest Rate Corridor Narrowed, Policy Rate Cut

To make credit more accessible, NRB has reduced the policy rate from 5% to 4.5% and cut the deposit collection rate from 3% to 2.75%. The bank rate has been kept unchanged at 6.5%. The current average deposit rate among commercial banks stands at 4.37%, while the average lending rate is around 8.11%.

These rate cuts signal further reductions in lending rates, encouraging both consumers and businesses to borrow and invest, especially in productive and long-term sectors like real estate and capital markets.

Capital Enhancement through Rights Issue

To address capital adequacy constraints faced by banks and financial institutions, the central bank has also proposed allowing them to issue rights shares (Haqprad shares). This follows SEBON’s recent approval of preferential share issuance, and is expected to help stabilize liquidity, resolve capital shortfalls, and accelerate loan disbursement in the financial system.

Due to limited capital buffers, banks have been struggling to expand credit despite having excess liquidity and historically low interest rates. The monetary policy directly addresses this structural bottleneck.

Microfinance Dividend Distribution Limit to Be Revised

The monetary policy also hints at relaxing the dividend distribution cap on microfinance institutions. Currently, such institutions are restricted from distributing more than 15% dividend annually (cash or bonus). The central bank plans to review and revise this cap, enabling microfinance institutions to attract more investors and strengthen their capital structure.

Share Market and Real Estate Trends Show Mixed Signals

In anticipation of a favorable policy, Nepal’s stock market saw a modest recovery this week. The NEPSE index climbed by 27.84 points to reach 2,731.80, with Thursday alone seeing a rise of 25.89 points, and total turnover crossing Rs 9.68 billion. Despite recent gains, investor sentiment remains cautious, but signs of recovery are emerging.

On the other hand, real estate activity shows a mixed trend. According to the Department of Land Management and Records, 56,010 property deeds were registered in the month of Jestha — down by about 5,000 compared to the same month last year. Land registration revenue stood at Rs 3.33 billion, a drop compared to the month of Baisakh.

Key Takeaways from NRB’s Monetary Policy 2082/83:

Housing loan limit raised to Rs 30 million; LTV ratio increased to 80%.

Share mortgage loan limit increased to Rs 250 million per household.

Policy rate cut to 4.5%, indicating lower borrowing costs ahead.

Rights share issuance permitted to boost capital adequacy in banks.

Dividend distribution limits on microfinance to be reviewed.

Credit expansion target set at 12%, despite last fiscal year’s slow credit growth (approx. 8%).

The new monetary policy is widely viewed as a balanced, accommodative, and growth-supportive framework that could rejuvenate Nepal’s capital markets, real estate, and overall economic environment in the months ahead.