NRB Tightens CRR Rules and Eases Share-Backed Loan Risk Weight in Latest Policy Review
Nepal Rastra Bank (NRB) has announced a new directive requiring banks and financial institutions (BFIs) to maintain at least 90% of their mandatory Cash Reserve Ratio (CRR) with the central bank on a daily basis.
Under the CRR provision, BFIs must keep 4% of their average deposit liabilities from the previous fortnight as reserves. Until now, they were only required to deposit 70% of that amount with NRB on a daily basis. The revised threshold means banks will have to park more zero-interest funds with the central bank, which could increase their operating costs.
Banking experts suggest this move may lead to a slight increase in base interest rates, as banks look to manage their profitability under the tighter reserve requirement.
In a separate move, NRB has also revised the risk weight on loans backed by shares. Effective immediately, all such loans will carry a 100% risk weight, regardless of the loan amount. Previously, loans backed by shares exceeding Rs. 50 lakh had a higher risk weight of 125%.
The reduction in risk weight is seen as a positive step for investors and borrowers, who had long been requesting a more balanced approach to share-backed lending.
The new rule will come into effect from Jestha 18 (June 1). These regulatory changes were introduced as part of the central bank’s third quarterly review of the Monetary Policy and have now been officially implemented through the latest NRB circular.