NRB reduced the risk weight of share mortgage loans to 100 percent (Monetary Policy Review full text)

Nepal Rastra Bank has reduced the risk weight of share-backed loans to 100 percent. The Nepal Rastra Bank, while making public the third quarter review of the monetary policy for the current fiscal year 2081/82, reduced the risk weight of share-backed loans by 25 percent to 100 percent.

Earlier, the risk weight of share-backed loans was 125 percent. With the 25 percent reduction, the risk weight of the existing share-backed loans remains at 100 percent. This provision of the Nepal Rastra Bank is expected to increase the size of loans flowing into the capital market by placing a lower risk weight on share loans for banks and financial institutions. In addition, investors in the stock market have also been demanding a reduction in risk weight for the past.

1. The monetary policy direction has been carefully balanced based on the internal economic and financial situation and scenario.

2. The policy rate has been kept unchanged at 5.0 percent, the deposit collection rate, which is the lower limit, has been kept unchanged at 3.0 percent, and the bank rate, which is the upper limit under the interest rate corridor, has been kept unchanged at 6.5 percent.

3. The existing mandatory cash balance and statutory liquidity ratios have been kept unchanged. Considering the existing liquidity situation of the financial system and the recent improvements made by this bank in open market transaction instruments, banks and financial institutions will be required to maintain a minimum mandatory cash balance of 90 percent daily.

4. The risk weight of the existing share collateralized loan will be reduced from 125 percent to 100 percent.

5. With the aim of improving the investment environment, the “Nepal Rastra Bank Foreign Investment and Foreign Debt Management Regulations, 2078” will be issued, incorporating the provisions of the latest amendments to the Foreign Exchange (Regulation) Act, 2019 and the Foreign Investment and Technology Transfer Act, 2075.

6. A procedure for verifying cheque dishonor will be formulated and issued in accordance with the amendment to the Banking Offences and Punishment