NRB Unveils Q3 Monetary Policy Review: Tightens Cash Reserve Rules, Lowers Risk Weight on Margin Loans

Kathmandu — Nepal Rastra Bank (NRB) has released the third quarterly review of the Monetary Policy for the current fiscal year, maintaining existing policy rates while introducing key regulatory measures aimed at reinforcing financial stability and improving the investment climate.

The central bank has kept the policy rate steady at 5 percent. Likewise, the deposit collection rate remains unchanged at 3 percent, and the bank rate stays at 6.5 percent. The Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) have also been left unchanged.

In a move to support credit flow and capital market activity, NRB has reduced the risk weight on share-backed (margin) loans from 125 percent to 100 percent. However, the current ceiling of Rs 150 million on such loans remains intact.

One of the most notable changes in the review is a tighter requirement for cash reserves. Banks and financial institutions are now mandated to maintain at least 90 percent of their required cash reserve in vaults on a daily basis. This decision follows an assessment of the liquidity position and recent enhancements in open market operation tools. NRB expects this measure to improve financial discipline and ensure that banks maintain adequate cash to meet demand.

To further promote foreign investment, the central bank announced plans to introduce the Foreign Investment and Foreign Loan Management Regulations, 2021. The regulation will incorporate recent amendments to the Foreign Exchange (Regulation) Act, 2019 and the Foreign Investment and Technology Transfer Act, 2019, signaling a more investor-friendly regulatory framework.

Additionally, NRB will soon draft procedures to certify cheque bounce cases, with the recent amendments to the Banking Offence and Punishment Act, 2008.