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NRB Cuts Risk Weight on MSME Loans to Boost Productive Sector Investment
Author
NEPSE trading
Kathmandu. The Nepal Rastra Bank has introduced a major policy reform targeting micro, small, and medium enterprises (MSMEs), in line with the government’s 100-day reform agenda. The central bank has amended its unified directive, reducing the risk weight to 60% for loans up to NPR 30 million extended to agriculture, information technology (IT), and productive industries.Previously, loans of up to NPR 25 million categorized under the “Regulatory Retail Portfolio” carried a risk weight ranging from 75% to 100%. The higher risk weight had placed pressure on banks and financial institutions to maintain additional capital reserves. With the revised provision, this pressure is expected to ease, enabling banks to expand lending to small businesses and productive sectors.To qualify for the concessional 60% risk weight, NRB has set specific eligibility criteria. The loan must meet at least one of the following conditions: the project must be insured, the loan must be secured through deposit and credit guarantee funds, or the collateralized property must maintain at least a 25% margin below its prevailing market value.This policy change is expected to directly benefit agro-based industries, IT-driven services such as software development, and manufacturing sectors reliant on local raw materials. Additionally, loans up to NPR 30 million with project insurance will also qualify for the reduced risk weight, further encouraging secured lending and credit expansion.The decision stems from the government’s 100-day governance reform plan, which emphasized lowering risk weights in agriculture, IT, and MSME sectors. Following this directive, NRB formally implemented the changes through a revised instruction.According to Ramu Paudel, Executive Director at NRB, the reduction in risk weight will provide significant relief in capital management for banks. He noted that the move is expected to stimulate investment in productive sectors, support domestic production, and help revive the slowing economy.The policy is also anticipated to improve financial access for small entrepreneurs and contribute to job creation at the local level.
