Monetary Policy for FY 2083/84 Focuses on Financial Stability, Regulatory Reforms and Banking Efficiency
Kathmandu — The Nepal Rastra Bank (NRB) has unveiled a series of regulatory and structural reforms through its Monetary Policy for FY 2083/84, aimed at making the country’s financial system more resilient, efficient and customer-centric. The policy introduces measures covering macroprudential regulation, financial sector reforms and improvements to banking services.
Recognising that monetary policy alone cannot adequately address systemic risks arising in specific sectors of the economy, the central bank has decided to continue deploying macroprudential regulatory tools. The objective is to detect emerging vulnerabilities at an early stage, contain financial risks and safeguard overall financial stability.
Financial sector reform has also been identified as a key priority to strengthen the transmission of monetary policy. As part of this strategy, the NRB plans to streamline branch management across banks and financial institutions, accelerate digitalisation and lower operating costs so that the resulting efficiency gains can be passed on to customers through better-quality financial services.
The central bank also intends to complete its ongoing review of the classification framework for banks, financial institutions and non-bank financial institutions. Based on the findings, a revised regulatory structure will be introduced to encourage institutions to expand services within their designated areas of operation.
Several policy measures have also been proposed to address long-standing challenges in credit operations. The NRB plans to eliminate the unlimited liability created by personal guarantees used as loan collateral, ease restrictions faced by borrowers blacklisted due to bounced cheques, introduce mechanisms to manage non-performing loans in distressed industries and facilitate the revival of stressed credit. In addition, share-backed lending limits will be linked to the financial strength of institutions, while loan-to-value (LTV) requirements for large electric vehicles used in public transportation will be relaxed.
To improve regulatory efficiency, the NRB has announced that it will simplify its directives to banks and financial institutions by removing overlapping provisions and overly complex language. The first phase of this exercise will focus on rewriting directives related to lending, interest rates and financial consumer protection.
The monetary policy also outlines plans to simplify the existing foreign exchange framework. According to the central bank, the integrated circular governing institutions engaged in foreign exchange transactions will be revised to make the regulatory regime more straightforward and easier to implement.