Monetary policy review: Risk weightage of vehicle loan reduced

The Nepal Rastra Bank (NRB) has, through the third quarter review of the monetary policy of the current fiscal year 2023/24, reduced the risk weightage of vehicle loans.

The risk weightage on hire purchase loans provided by banks and financial institutions has been reduced to 100 percent from the existing 125 percent.

Similarly, a provision has been brought allowing for the extension of loans for home purchases based on the Debt Service to Gross Income Ratio, from the existing 50 percent to 70 percent, based on the presentation of appropriate evidence.

In the review of the monetary policy, the Central Bank has introduced a provision where banks and financial institutions can sell up to 20 percent of their primary capital in a single fiscal year from investments made in the mid-category.

Likewise, the loan loss requirement provision for loans classified as 'good loans' from banks and financial institutions has been maintained at 1.20 percent from the existing 1.25 percent.

According to the NRB, the existing provision related to import and sale of silver would be reviewed. The flexibility outlined in the annual monetary policy has been continued in the third quarterly review, added the NRB.

"Based on the current internal and external economic conditions and outlook, the policy rate of 5.5 percent, the deposit collection rate under the interest rate corridor of 3.0 percent and the bank rate of 7.0 percent has remained unchanged," reads the third quarter review.

The provision of permanent deposit facilities would be reviewed as necessary to ensure the effectiveness of interest rate corridor as well as necessary facilitation would be provided for the use of additional instruments to further strengthen the capital base of banks and financial institutions.