The Nepal Rastra Bank (NRB), the central bank of Nepal, has issued its third quarterly review of the Monetary Policy for the current fiscal year. The review outlines key policy measures aimed at facilitating financial institutions and supporting economic growth.
One of the significant changes introduced in the review is the adoption of a more flexible policy for real estate and hire purchase loans. The central bank has increased the debt service to gross income ratio for real estate purchases to 70 percent from the previous 50 percent, based on tax clearance documents. This move is expected to provide greater flexibility to borrowers seeking to acquire real estate properties.
Additionally, the NRB has decreased the risk-weighted capital requirement for hire purchase loans issued by banks and financial institutions (BFIs) to 100 percent from the previous 125 percent. This adjustment aims to encourage lending in the hire purchase segment, which could potentially stimulate consumer spending and support economic recovery.
In a bid to facilitate capital adequacy for banks and financial institutions, the central bank has announced plans to introduce additional tools and measures. The review highlights the NRB’s commitment to strengthening the capital base of BFIs, ensuring their financial stability and resilience.
“The debt service to gross income ratio for real estate purchases has been increased to 70 percent from the previous 50 percent based on the tax clearance document,” stated the review, underscoring the central bank’s efforts to support the real estate sector.
Furthermore, the NRB expressed its intention to loosen its grip on various loan investments, suggesting a more accommodative stance toward lending and investment activities by financial institutions. This move is expected to enhance credit flow and support economic recovery efforts in various sectors.
The third quarterly review of the Monetary Policy is a crucial exercise undertaken by the NRB to assess the financial landscape and introduce necessary policy adjustments. By adopting a flexible approach to real estate and hire purchase loans, and easing investment norms, the central bank aims to strike a balance between financial stability and economic growth objectives.
