In an effort to channel credit into productive industries, Nepal Rastra Bank (NRB) has unveiled plans to increase lending to the production sector and expand credit limits for agriculture, energy, and micro, cottage, and small enterprises.
During the mid-term review of the Monetary Policy for 2025/26 presented on Tuesday, the central bank revised the mandatory minimum credit ratio that Banks and Financial Institutions (BFIs) must allocate to priority sectors. The expanded credit framework will also cover tourism, information technology, and export-oriented industries that use domestically produced raw materials.
The policy adjustment comes as BFIs have increasingly prioritized consumer lending over production-focused financing. According to an NRB report, by mid-January of the current fiscal year, BFIs had issued Rs 1.261 trillion in consumption loans. In comparison, lending to agriculture, forestry, and production-related sectors totaled Rs 965.25 billion.
Despite declining interest rates driven by excess liquidity in the banking system, the central bank has opted to keep its key monetary tools unchanged. The interest rate corridor, bank rate, cash reserve ratio, and standing liquidity ratio remain intact under the revised policy.
The updated framework also aims to attract foreign direct investment into emerging sectors such as data centers, cloud computing, robotics laboratories, and artificial intelligence. The NRB plans to encourage credit flow to these projects, particularly those operating under co-financing arrangements. Additionally, the ceiling for primary capital on BFIs’ non-derivable forward transactions—covering short-term foreign exchange derivatives for non-convertible currencies—has been increased.
To provide greater operational flexibility, the central bank has eased regulations on working capital loans. BFIs can now independently determine repayment periods, and borrowers are allowed to maintain a sanction limit of up to 30 percent of the outstanding loan amount, up from the previous 10 percent cap.
Kamlesh Kumar Agrawal, president of the Nepal Chamber of Commerce, welcomed the revisions, calling them a positive development. He noted that the measures could stimulate investment in production-oriented businesses in the post-election period. He also highlighted the focus on digital infrastructure and loan restructuring provisions for businesses affected by infrastructure projects as particularly encouraging steps.
