NRB finalizes monetary policy for FY 2024/25

KATHMANDU: Representatives from Nepal Rastra Bank (NRB) have stated that the monetary policy for the 2024–2025 fiscal year is prepared and will be unveiled on Sunday. The NRB's Economic Research Department's executive director, Prakash Kumar Shrestha, confirmed in a meeting on Friday that the board had approved the policy draft. The policy announcement that was scheduled for Friday has been rescheduled in light of current political events.

Stakeholders have expressed dissatisfaction with the upcoming budget, leading them to turn to the NRB with extensive requests. NRB officials have noted a surge in expectations from various economic sectors. Despite a recent uptick in the share market, many internal economic indicators remain weak. Domestic market demand has dropped significantly, and the real estate sector is nearly stagnant.

Banks are currently facing excess liquidity but are struggling to expand their operations. This difficulty is attributed to factors such as low investor confidence, rising bad debts, and issues related to capital adequacy. Consequently, banks and financial institutions have increased private sector lending by only about half of the central bank's target of 11.5 percent.

The NRB is expected to adopt a more flexible approach in the upcoming monetary policy to address the growing issue of loan defaults. With non-performing loans reaching approximately five percent, the central bank plans to facilitate the restructuring of loans for business entities. This adjustment aims to alleviate the financial strain on banks caused by increasing bad debts.

The new monetary policy will also introduce measures to enhance cross-border online payments with India and other countries. NRB Governor Maha Prasad Adhikari has indicated that the central bank will support a digital payment system to simplify international financial transactions. Additionally, the NRB has allowed small businesses to access working capital loans up to Rs 40 million, though there is ongoing pressure to offer even greater flexibility in this area.