Inflation remains below target; growth projected at 3.85%
KATHMANDU, MAY 16
The Nepal Rastra Bank (NRB) has unveiled the third quarterly review of its Monetary Policy for the current fiscal year, retaining most policy measures unchanged.
The central bank said it would continue its flexible monetary policy stance, taking into account adequate foreign exchange reserves, inflation targets and subdued economic growth.
Key instruments-including the interest rate corridor, bank rate, cash reserve ratio (CRR) and statutory liquidity ratio (SLR)-have been left unchanged. However, NRB said provisions related to the Standing Deposit Facility (SDF) would be reviewed to enhance the effectiveness of the interest rate corridor.
According to preliminary estimates by the National Statistics Office, the country's economic growth is projected at 3.85 percent for the current fiscal year.
The central bank noted a gradual improvement in aggregate demand, driven by wholesale and retail trade, tourism, hydropower, financial services, transport and information technology sectors. Increased investment as a share of GDP has also been observed.
NRB stated that ongoing administrative, economic and legal reforms by the government are expected to support investment and economic expansion if the current policy direction is maintained.
Inflation remains within the target, with average consumer inflation standing at 2.39 percent up to the third quarter. However, the bank warned of possible upward pressure on prices due to global geopolitical tensions.
The external sector has improved, supported by rising remittance inflows, which have strengthened the current account and foreign exchange reserves. Nevertheless, NRB cautioned that heavy reliance on remittances from West Asia-accounting for nearly 40 percent-poses risks amid regional instability.
The review also noted a slight rise in non-performing loans, though repayment is expected to improve with economic recovery.
As of mid-April 2026, capital adequacy ratios of banks and financial institutions remain within regulatory standards, indicating overall financial stability. The report added that the financial system has remained highly liquid in recent years, which could influence broader macroeconomic conditions.
(With input from RSS)
