Monetary policy mid-term review: policy rates maintained at 5 pc, vehicle loan ratio lowered to 60 pc

KATHMANDU: Nepal Rastra Bank (NRB) has released the mid-term review of monetary policy for current fiscal year 2024/25.

The review indicates that the central bank has kept the existing policy rate and deposit collection rate for banks and financial institutions (BFIs) unchanged. Additionally, some adjustments have been made to the regulations regarding vehicle loans.

The policy rate has been maintained at 5%, while the deposit collection rate remains at 3% and the bank rate at 6.5%, according to the NRB.

BFIs have received concessions in the provisions related to credit flow. The loan loss provision for good loans has been reduced from 1.10% to 1%.

Likewise, the loan-to-value ratio for vehicles has been revised. Previously, loans of up to 80% were provided on electric vehicles (EVs). The new regulation sets the loan-to-value ratio limit at 60% for personal vehicles and all types of EVs.

The NRB asserts that these policies will support the expansion of economic activities and help achieve the economic growth target set by the Government of Nepal. However, financial and monetary indicators up to January 28 of the current fiscal year show that most indicators, except for external ones, are in a poor state.

The NRB's analysis of credit flow for the first six months of fiscal year 2024/25 suggests that economic activities are in the process of expansion. The average inflation rate in the first six months stands at 4.97%.