NRB keeps monetary policy flexible

By A Staff Reporter

Kathmandu, May 17: Nepal Rastra Bank has announced that it will review the existing provision related to providing a Standing Deposit Facility (SDF) to banks and financial institutions.

The central bank adopted this policy measure while unveiling the third-quarter review of the monetary policy for the current fiscal year 2025/26 in order to make the interest rate corridor more effective.

The central bank said that the existing policy measures related to the interest rate corridor, bank rate, cash reserve ratio (CRR), and statutory liquidity ratio (SLR) will remain unchanged.

NRB said that the continuation of the accommodative monetary policy stance is aimed at supporting economic activities while maintaining stability in prices, the external sector, and the financial system.

According to the central bank, the flexible monetary policy stance adopted since the beginning of the current fiscal year has been continued in view of the low economic growth situation, while projections indicate that foreign exchange reserves and inflation will remain within the bank’s target level.

For the fiscal year 2025/26, the preliminary estimate of the National Statistics Office shows that economic growth will remain at 3.85 per cent despite internal and external pressures. 

Among the sectors, although the agricultural sector is estimated to grow by only 1.58 per cent due to adverse weather conditions and natural disasters, the industrial sector is projected to record a growth rate of 5.67 per cent and the service sector 4.21 per cent.

The share of investment in the gross domestic product has increased in the current fiscal year. 

Among sectoral outputs, wholesale and retail trade, domestic and international tourism, hydropower, financial and insurance services, transportation and storage, and information technology sectors have continued to expand, leading to expectations of a gradual improvement in aggregate demand, said the NRB.

As the government has prioritised governance, economic, and legal reforms, it is expected that the continuation of the current monetary policy stance will help boost investment and support the expansion of economic activities.

According to NRB, inflation remains below the target set by the central bank.

However, there is a risk of inflationary pressure if global geopolitical tensions continue. 

With the outbreak of war in West Asia, supply chains of petroleum products, industrial raw materials, and certain consumer goods have been affected.

During the period from February 28, 2026 to May 14, 2026, the price of petrol in Nepal increased by 35 per cent while diesel prices rose by 58 per cent. 

Despite this, the average consumer inflation stood at 2.39 per cent until the third quarter of fiscal year 2025/26, and annual average consumer inflation is projected to remain within the targeted limit. 

The central bank has set a target of keeping annual average consumer inflation within 5 per cent for the current fiscal year.