Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal Rastra Bank (NRB) is intensifying efforts to release the third monetary policy review for the fiscal year 2025-26, with a critical deadline looming on May 29, 2025. Regulations mandate that the review be published within 45 days of the third quarter’s end, a period that concluded in mid-April. The timing is complicated by the government’s budget announcement scheduled for the same day, prompting NRB to aim for a release within the next one to two days, according to central bank sources.
The delay in appointing a new governor had initially slowed progress. Bishwanath Poudel, appointed governor on May 20, 2025, has taken charge of finalizing the review. Prior to his appointment, acting governor Nilam Dhungana laid the groundwork, conducting discussions with NRB’s board of directors.
Sources indicate that Poudel plans to make minor revisions to Dhungana’s draft, with the research department having already prepared the document. The management committee is currently deliberating potential policy adjustments, and Poudel is expected to convene a board meeting soon to approve and publish the review.
Expectations are high that Poudel, as the new governor, may introduce targeted measures to address market concerns, particularly in the banking and stock sectors. One anticipated change is the possible removal of the NPR 150 million cap on share-backed loans for individual investors from single-family groups, a move that could stimulate activity in the Nepal Stock Exchange (NEPSE).
However, significant policy shifts are unlikely, as Poudel has had limited time to fully assess the monetary landscape since taking office. NRB officials suggest he will largely continue the policies of his predecessor, Mahaprasad Adhikari, reserving major reforms for the upcoming annual monetary policy.
The fourth quarter typically sees subdued banking activity, with banks focusing on loan recovery rather than new lending. Stable interest rates and low credit demand, coupled with banks’ emphasis on year-end closings, reduce the need for extensive changes in this review. Nonetheless, minor regulatory tweaks could be introduced to enhance bank profitability as the fiscal year ends in mid-July. For instance, adjustments to ease regulatory constraints may support financial institutions’ balance sheets.
The banking sector’s challenges, including the diversion of share-backed loans to non-stock investments, have limited NEPSE’s growth despite increased lending. Poudel’s potential relaxation of loan caps could address this, but with limited scope for action before June, significant reforms are more likely in the new monetary policy. NRB’s cautious approach aims to maintain economic stability while navigating the fiscal year’s end and aligning with the government’s budget priorities.
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