The Nepal Rastra Bank (NRB), in its third-quarter review of the monetary policy for the fiscal year 2023/24, has reduced the risk weightage for vehicle loans.
In the review, the risk weightage on hire purchase loans provided by banks and financial institutions has been decreased from 125 percent to 100 percent.
Additionally, the NRB has introduced a provision allowing for the extension of home purchase loans based on the Debt Service to Gross Income Ratio, increasing it from the current 50 percent to 70 percent, provided appropriate evidence is presented.
The Central Bank has also allowed banks and financial institutions to sell up to 20 percent of their primary capital in a single fiscal year from investments made in the mid-category.
Furthermore, the loan loss provision requirement for loans classified as ‘good loans’ has been adjusted to 1.20 percent from the existing 1.25 percent.
The NRB announced that the existing provisions related to the import and sale of silver would be reviewed.
Flexibilities outlined in the annual monetary policy have been continued in the third-quarter review.
“Based on the current internal and external economic conditions and outlook, the policy rate of 5.5 percent, the deposit collection rate under the interest rate corridor of 3.0 percent, and the bank rate of 7.0 percent remain unchanged,” reads the third-quarter review.
The provision for permanent deposit facilities will be reviewed as necessary to ensure the effectiveness of the interest rate corridor.
Additionally, necessary facilitation will be provided for the use of additional instruments to further strengthen the capital base of banks and financial institutions.
