#First Quarter Review of Monetary Policy

NRB reduces risk weight of real estate loans, maintains risk weight for share mortgage loans

Published On: December 9, 2023 08:30 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Dec 9: Nepal Rastra Bank (NRB) has, through the first-quarter review of the monetary policy for the current fiscal year 2023/24, decided to reduce the risk weight of real estate loans and maintain the risk weight for share mortgage loans exceeding Rs 50 million at 125 percent.

The announcement of the NRB on Friday highlighted that these provisions were made during the first-quarter review of the monetary policy for the fiscal year 2023/24. The quarterly review report states, "In the case of housing loans up to Rs 5 million, the monthly installment income ratio has been increased to 60 percent." NRB also mentioned its intention to review arrangements related to the limits of non-deliverable forward transactions and local remittance transactions.

Through its monetary policy, the NRB aims to take more effective action against borrowers intentionally defaulting on bank loans. Simultaneously, the policy seeks to facilitate borrowers facing challenges due to circumstances through loan restructuring and rescheduling.

"To achieve this, banks and financial institutions have been directed to expand the scope of restructuring by charging 10 percent of the outstanding interest. Additionally, the areas eligible for restructuring have been extended until the end of Chaitra 2080 BS, with a charge of 10 percent of the outstanding interest," stated the first-quarter review of the monetary policy.

Regarding the reconstruction of residential houses damaged in the Jajarkot earthquake, to the families listed as affected by the earthquake by the Nepal government or designated organizations, banks and financial institutions cannot impose more than a two-percentage-point premium on the residential house loan base rate up to Rs 2.5 million for families listed as earthquake-affected.

Banks and financial institutions can add up to 10 percentage points or more to the loan-to-mortgage ratio. Furthermore, for the reconstruction of public schools, hospitals, and health posts damaged in the earthquake, NRB allows banks and financial institutions to contribute up to 40 percent of the amount separately spent on the social responsibility fund from the profits of the fiscal years 2022/23 and 2023/24.

Monetary Policy review will facilitate credit flow: Governor Adhikari

Nepal Rastra Bank’s Governor Mahaprasad Adhikari said the first quarter review of the monetary policy for the current fiscal addresses various issues affecting current inflation, the status of balance of payment and growth rate of the bank loans for the private sector among others.

In a press conference organized on Friday to inform about the quarterly review of the monetary policy, Governor Adhikari said that the Nepal Rastra Bank (NRB) had adopted the policy to facilitate the expansion of loan and facilitation for continuity of business for the good borrowers.

Adhikari informed that the NRB would deal strictly with the debtors not clearing their loans while those debtors who are genuinely in trouble will be facilitated for loan restructuring.

He reaffirmed that the NRB is determined to maintain the interest rate corridor as well as to maintain the policy rate in view of inflation.

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