Directives Issued by NRB for Implementation of Measures Announced in Monetary Review

The Nepal Rastra Bank (NRB) issued directives on Sunday, outlining measures announced during the monetary policy review for the first quarter. The changes aim to ease borrowing processes for individuals and financial institutions.

One key adjustment involves the monthly installment income ratio for housing loans up to Rs 50 lakh, which has been set at 60 percent. The NRB directive marks an increase from the previous ratio of 50 percent, providing borrowers with more flexibility. For instance, if the monthly installment is Rs 20,000, the income requirement would now be Rs 40,000, allowing individuals with an income of Rs 40,000 to manage installments up to Rs 24,000.

Prior to these changes, institutions were obligated to present additional documents to demonstrate income, making the loan application process more stringent.

Moreover, the NRB has introduced flexibility in the treatment of debentures, a move announced in the Monetary Review. Until Poush 2080, these debentures will be considered 100% as resources. However, from Poush 2080 to Ashad 2081, the recognition will be reduced to 50%. This adjustment is deemed essential due to the substantial size of debentures, totaling approximately Rs. 1 Kharba.

In addition to these measures, the Nepal Rastra Bank has made changes to bank rates and policy rates. The bank rate has been lowered from 7.5% to 7%, the policy rate has seen a significant decrease from 6.5% to 5.5%, and the deposit collection rate has been maintained at 3.0%.

Furthermore, the NRB has lowered the risk-weighted asset for all types of real estate held by banks and financial institutions. Additionally, the risk associated with share mortgage loans exceeding Rs. 50 lakh has been reduced to 125%.