By Our Reporter

The Nepal Rastra Bank (NRB) has issued the third quarterly review of the monetary policy this week.

In its monetary policy, the central bank has said that the existing risk weight for margin lending (loan against shares) will be reduced from 125 per cent to 100 per cent.

The central bank has pledged this policy amendment in the third quarterly review of the Monetary Policy of the current Fiscal Year 2024/25, which was published on Sunday. 

Considering the liquidity situation in the financial system and reforms made by the central banks in the tools used in open market operations, arrangements will be made for financial institutions to maintain a daily minimum cash reserve of 90 per cent of their total deposits and other financial resources, read the review report.

The current provisions regarding mandatory cash reserves and statutory liquidity arrangements have been maintained.

Likewise, the existing lower and upper limits of the interest rate corridor – 3.0 per cent for deposits and 6.5 per cent for bank rate – as well as 5.0 per cent policy rate are kept intact. 

The NRB also said in the review that to improve the investment climate, provisions including the Foreign Exchange (Regulated) Act, 2074 and the Foreign Investment and Technology Transfer Act, 2075, along with subsequent amendments, have been incorporated to issue 'Nepal Rastra Bank Foreign Investment and Foreign Loan Management Bylaws, 2078'.

"Work is being carried out to formulate a policy framework to criminalise cheque bouncing under the Banking Offence and Punishment Act, 2064," read the report. 

To maintain inflation within the desired range of 5 per cent, the monetary policy aimed to control the expansion of the money supply. As a result, as of nine months, consumer price inflation stands at 4.57 per cent, said the NRB. 

"The current account remains in surplus due to a significant increase in foreign exchange remittances. 

As of nine months, the forex reserves are sufficient to cover the import of goods and services for 14.2 months," read the report.