Effective from Jestha 18 (June 01), banks and financial entities in Nepal are now mandated to deposit a minimum of 90% of their required Cash Reserve Ratio (CRR) with the Nepal Rastra Bank (NRB) on a daily basis. A circular was issued by the central bank on Wednesday, stipulating that these institutions must maintain at least 90% of the stipulated CRR amount—4% of their average biweekly deposit liabilities—at the NRB daily.
Previously, banks were required to keep a daily minimum of 70% of the necessary CRR amount. This recent regulation amplifies the zero-interest funds that banks need to retain with the central bank, which is likely to increase their operational expenses. Experts predict that this may lead to a slight increase in the base interest rates released by banks.
In another directive, NRB has also adjusted the risk weight on share-backed loans to 100%, effective immediately. Previously, loans secured by shares exceeding Rs. 50 lakh were subject to a risk weight of 125%. Investors and stakeholders have been persistently advocating for the central bank to lessen the risk weight on such loans.
These alterations were introduced as part of the third quarterly assessment of the Monetary Policy and are now enforced through NRB’s latest circular.
