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Started 1 month ago · Updated 1 week ago

Nepal Rastra Bank Signals Stable Monetary Policy Amidst External Risks and Internal Challenges

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Nepal's central bank, Nepal Rastra Bank (NRB), has indicated a continuation of accommodative monetary policy with stable interest rates and adequate liquidity, despite warnings of growing external risks from global geopolitical tensions and rising petroleum prices. The NRB's third-quarter review suggests no immediate tightening of liquidity or significant policy rate changes, with inflation remaining under control and foreign exchange reserves strong. However, the banking sector faces rising non-performing loans, and the real deposit interest rate has turned negative.

  • Non-performing loans (NPLs) in Nepal's banking sector have increased to 5.60% in the third quarter of fiscal year 2025/26, according to NRB.
  • The real interest rate on bank deposits has turned negative, with inflation at 4.47% by mid-April outpacing the weighted average deposit interest rate of 3.40%.
  • The government has ordered stricter enforcement of labor laws for outsourced workers in banks and financial institutions, instructing NRB to ensure compliance.
  • The Nepal Insurance Authority has prohibited Himalayan Reinsurance from undertaking new business until mid-July due to unspecified reasons.
  • The arrest of Jyoti Prakash Pandey, CEO of Nepal Investment Mega Bank, on fraud allegations has raised concerns among the private sector regarding government interference.

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