Nepal Interest Rate Trend (2025/26 Mid-March Update)
Interest rates in Nepal underwent a notable V-shaped movement in FY 2025/26 — declining through December 2025, then rising sharply from January 2026 as the NRB tightened policy. Here is the full monthly breakdown.
Policy Rates (NRB)
| Month | Repo Rate | Bank Rate | Deposit Collection Rate |
|---|---|---|---|
| Aug 2025 | 4.50% | 6.00% | 2.75% |
| Sep-Nov 2025 | 4.50% | 6.00% | 2.75% |
| Dec 2025 | 4.25% | 5.75% | 2.75% |
| Jan 2026 | 5.00% | 6.50% | 3.00% |
| Feb-Mar 2026 | 5.00% | 6.50% | 3.00% |
Commercial Bank Rates
| Month | Wtd Avg Lending | Wtd Avg Deposit | Spread |
|---|---|---|---|
| Aug 2025 | 7.76% | 4.02% | 3.74% |
| Sep | 7.66% | 3.96% | 3.70% |
| Oct | 7.50% | 3.85% | 3.65% |
| Nov | 7.38% | 3.74% | 3.64% |
| Dec | 7.26% | 3.66% | 3.60% |
| Jan 2026 | 8.69% | 4.75% | 3.94% |
| Feb | 8.55% | 4.62% | 3.93% |
| Mar | 8.40% | 4.54% | 3.86% |
The V-Shape Explained
Decline (Aug-Dec): NRB maintained and even lowered the repo rate (to 4.25% in Dec) amid low inflation (1.11-1.63%) and excess liquidity. Banks competed for credit customers by cutting lending rates.
Rise (Jan-Mar): NRB reversed course, hiking the repo rate to 5.0% as inflation accelerated (2.42% → 3.62%). Banks passed through the higher cost of funds to borrowers immediately.
Impact on the Economy
- Real estate: Higher rates could cool the property market as mortgage costs rise
- Business investment: Marginal projects become unviable at 8.40%+ lending rates
- Stock market: Rising rates typically negative for equity valuations
- Savers: Benefit from rising deposit rates — 4.54% is better than 3.66% four months ago
Conclusion
Nepal's interest rate cycle has turned from easing to tightening. The NRB's January 2026 hike signals that inflation control is now the priority over growth support. Market participants should expect rates to remain elevated as long as CPI inflation stays above 3%.