Governor Poudel bets on cheap money to deliver 7% growth

Biswo Nath Poudel did not come up through the central bank. Nepal's 18th governor is an economist with a doctorate in agricultural and resource economics from the University of California, Berkeley, and an engineering degree from Shanghai. Before taking charge of Nepal Rastra Bank (NRB) in May 2025 he spent 14 months as vice-chairman of the National Planning Commission. Earlier he worked as a consultant for the World Bank and the International Labour Organization, taught at Kathmandu University and sat on the boards of Sanima Bank and a hydropower company.

On taking office he promised to strengthen protection for depositors, improve lending policy and support the government's fiscal goals without giving up the central bank's independence, according to ShareSansar. His tenure has since spanned the Gen Z uprising of September 2025 and the formation of a new government in March 2026, which brought Swarnim Wagle to the finance ministry under Prime Minister Balendra Shah.

The policy

His second monetary policy, presented on 7 July for the 2026/27 fiscal year, kept what the NRB calls a cautiously flexible stance. The policy rate, the standing deposit facility rate, the cash reserve ratio and the statutory liquidity ratio were all left unchanged.

The headline numbers are ambitious. The central bank backs the government's target of 7% economic growth, which it says is attainable if global conditions hold and investor confidence improves. It projects average inflation of about 5.5%, below the government's ceiling of 6%, and aims to keep foreign-exchange reserves above seven months of imports. To fund the expansion it plans for banks and financial institutions to extend Rs 652bn (about $4.2bn) in new credit, according to the Himalayan Times. Private-sector credit is projected to grow 11% and broad money 14%.

Poudel justified the continuity on the grounds that reserves were comfortable and the macroeconomic picture favourable, the Kathmandu Post reported. Inflation averaged 2.66% in the first ten months of the year that ended in July.

The small print

The more revealing measures are narrower. The NRB relaxed loan-to-value limits for large electric vehicles used in public transport. It allowed viable but distressed businesses to restructure loans. It encouraged banks to invest surplus funds in foreign government securities, an admission that they have more money than borrowers. It commissioned studies on peer-to-peer lending and on how banks should be classified before the regulatory framework is revised. In a speech before the policy was published, Poudel stressed financial stability and appropriate interest rates, Spotlight reported.

The problem he cannot fix alone

The difficulty is demand. In 2025/26 deposits at banks and financial institutions grew 13.9% while private-sector credit grew only 6.5%, according to central bank data reported by The Rising Nepal. Commercial banks' weighted average lending rate had fallen to 6.55% by mid-July, low by Nepali standards. Money is cheap and plentiful; businesses are not borrowing. We examined the causes in banks flush, nobody borrowing.

That makes the 11% credit target a forecast about confidence rather than a lever the central bank controls. Monetary policy can lower the cost of a loan. It cannot make a factory owner believe that demand will be there when the factory is built, or persuade a bank that a hydropower developer will survive the next flood.

Poudel has other pressures. Nepal remains on the FATF grey list, and the governor was among the officials who met the Asia/Pacific Group's delegation in May. Microfinance defaults are rising, and the cooperative crisis has pulled the NRB into supervising the largest savings cooperatives.

His bet is that patience pays: keep money cheap, keep reserves high, and let reforms elsewhere revive investment. If growth falls well short of 7% this year, the question will be whether the central bank's patience was prudence or passivity.