Nepal Rastra Bank (NRB) is set to unveil the Monetary Policy for the upcoming fiscal year 2082/83 on Friday. The policy will be finalized and approved by the central bank’s Board of Directors in the morning, with a public announcement expected by afternoon.

This will be the first monetary policy under Governor Prof. Dr. Bishwanath Paudel’s leadership, and according to sources, it is expected to be expansionary in nature. The policy draft was presented to the board following an in-depth discussion at the bank’s management committee on Thursday.

Nepal's economy remains sluggish, with low credit demand despite reduced interest rates. Nearly NPR 800 billion in liquidity is currently sitting idle in the banking system, highlighting the challenges faced by the economy. In this context, the upcoming monetary policy is designed to boost credit demand and revitalize economic activity.

In line with the fiscal budget, the policy is expected to address key areas such as loan restructuring, the establishment of an Asset Management Company for bad loan resolution, and the introduction of digital banking systems. Provisions for concessional working capital loans and interest penalty waivers for struggling businesses are also likely to be included. Additionally, microfinance borrowers are expected to benefit from subsidized loan schemes.

To address the slowdown in the real estate sector, the policy will likely increase the limit on personal housing loans, adjust collateral valuation ratios, and raise the loan-to-value (LTV) ratio for real estate lending above 50%.

For the capital market, the central bank is planning to relax the one-year lock-in period currently imposed on banks and financial institutions for stock investments, thereby encouraging greater market participation.

There is also a possibility that the central bank will reduce the policy rate while increasing the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) to balance liquidity management.

Governor Paudel, shortly after his appointment, formed a task force led by Dr. Rewat Bahadur Karki to suggest reforms for the banking sector. The task force is expected to submit its report by Sunday and has reportedly recommended a six-point agenda to make the monetary policy more liberal and pragmatic.

The upcoming monetary policy, aligned with the national budget, is expected to play a crucial role in reviving Nepal’s ailing economy.