From Retail Loans to Real Growth

Nepal Rastra Bank (NRB) has decided to push banks to lend more to farms, factories and small businesses instead of focusing mainly on consumption loans. In its mid-term review of the Monetary Policy for 2025–26, the central bank revised the mandatory credit ratio for priority sectors and expanded lending limits for agriculture, energy, and micro and cottage industries. It has also brought tourism, information technology and export-based businesses that use local raw materials under this focus. By mid-January of the current fiscal year, banks and financial institutions had disbursed Rs 1.261 trillion in consumption loans. Loans to agriculture, forestry and production activities stood at Rs 965.25 billion. That gap reflects a structural bias. Even with excess liquidity pushing interest rates down, banks have preferred retail and consumption lending. At the same time, NRB kept the interest rate corridor, bank rate, cash reserve ratio and statutory liquidity ratio unchanged. In short, while the central bank has not altered its macroeconomic stance, it has signalled a clear shift in credit allocation. This shift is long overdue.