Nepal’s New Economic Roadmap: Key Highlights of the 2025/26 Monetary Policy

The central bank of Nepal, Nepal Rastra Bank (NRB) has unveiled its monetary policy for the fiscal year 2025/26 (2082/83 BS), adopting a flexible and expansionary stance aimed at revitalizing the economy. The policy introduces several significant measures to stimulate growth, enhance liquidity, and support various sectors.

Key initiatives include reductions in interest rates and increased loan limits to boost economic activity. Specifically, the policy rate has been lowered from 5% to 4.5%. Individual limits for loans against shares have been raised from NPR 150 million to NPR 250 million, and the residential housing loan limit for individuals has increased from NPR 200 million to NPR 300 million, with a higher loan-to-value ratio (80%) for first-time home buyers.

To attract foreign investment, commercial banks are now permitted to offer foreign exchange risk management services, and regulations are set to be amended to simplify foreign investment and repatriation of returns. The remittance sector will see enhanced transparency through the classification of companies based on capital and transaction volume.

The policy also supports specific sectors and initiatives, such as promoting businesses along the Hulaki Rajmarga  and Madhya Pahadi Highway with tailored credit facilities. Furthermore, NRB is reviewing working capital loan guidelines to make them more adaptable to various industries, particularly agriculture, SMEs, education, health, media, and communication.

For microfinance institutions, reforms are being introduced to facilitate loans to low-income groups, with specific provisions for youths seeking overseas employment and women entrepreneurs. The foreign exchange limit for Nepali citizens traveling abroad (excluding India) has been increased from USD 2,500 to USD 3,000, and Bangladeshi Taka and Sri Lankan Rupee have been added to Nepal’s official list of convertible foreign currencies.

Beyond immediate stimulus, the policy outlines structural reforms aimed at long-term economic stability and growth, including strengthening oversight of Systemically Important Banks (SIBs). While the policy is seen as beneficial for the stock market and real estate, some experts highlight that income verification criteria may still pose challenges for borrowers.