With banks holding excess liquidity and interest rates at historic lows, Nepal Rastra Bank (NRB) has relaxed several policies to stimulate credit expansion. In its first review of the 2025/26 Monetary Policy, the central bank adopted more flexible provisions to encourage personal and small-scale lending.
Despite targeting 12% private-sector credit growth this fiscal year, lending has increased by only 2% in the first four months, largely due to subdued business confidence. To address this, NRB has doubled the personal overdraft limit from Rs 5 million to Rs 10 million, a move expected to encourage investment in assets and the stock market.
Microfinance institutions also received a major boost, with their lending cap raised from Rs 700,000 to Rs 1.5 million—supporting agriculture, cottage industries and rural enterprises.
The bank further narrowed the interest rate corridor by reducing the Standing Liquidity Facility rate to 5.75% and the policy rate to 4.25%, while keeping the deposit collection rate at 2.75%. NRB noted that positive real interest rates and ample liquidity make further tightening unnecessary.
To reflect rising digital transactions, BFIs can now merge outlets in metropolitan areas to cut costs. The review also introduced relief measures for disaster-affected businesses, allowing loan restructuring with interest payments as low as 10% of outstanding dues.
Overall, the review signals a stimulus-oriented approach aimed at boosting credit demand, supporting small businesses and unlocking idle liquidity in the economy.
