Nepal Rastra Bank’s Monetary Relief Measures for Businesses Affected by the Gen-Z Movement
In response to the economic disruption caused by the Gen-Z Movement in Nepal, the interim government approved the Economic Recovery and Business Rehabilitation Plan on September 21, 2025. To operationalize aspects of this plan, Nepal Rastra Bank (NRB), the nation’s central bank, issued a crucial circular on September 26, 2025, introducing comprehensive monetary relief measures tailored to affected businesses. These come as much-needed support to revive markets and protect jobs amid ongoing uncertainties.
Loan Restructuring and Rescheduling for Directly Affected Businesses
A key relief feature allows banks and financial institutions to offer loan rescheduling and restructuring even if prior conditions related to repayment capacity decline were not met. This means affected businesses can defer installments or revise loan agreements based on mutual consent with lenders. The restructuring process must be completed by mid-January 2026, ensuring timely relief.
Additionally, loans will retain their original classification (performing or non-performing) as of July 2025, preventing artificially upgraded credit status solely due to restructuring. This transparent approach maintains banking prudence while extending relief.
1. Support Extended to Linked Businesses
Beyond directly impacted borrowers, the circular extends similar loan relief to businesses with forward or backward linkages to affected firms, upon verification of impact. However, such borrowers must have paid at least 5% of the interest before accessing restructuring, with the same timeline and classification norms applied.
2. Reduced Interest Rates to Ease Financial Burden
To further ease financial stress, banks can now charge only up to 0.5% above the base lending rate on restoration loans, a significant drop from the former 5% premium. This reduction helps lower borrowing costs for affected industries, encouraging faster recovery.
An exemption is also granted for watchlist classification due to debt-to-equity ratio exceeding stipulated norms, but only for restoration-specific loans with a one-year validity.
3. Increased Loan-to-Value Ratio for Business Vehicles
Recognizing the need to replace damaged business vehicles and transport equipment, NRB raised the loan-to-value (LTV) ratio from 60% to 80%. This adjustment allows businesses to finance a greater share of vehicle costs through bank loans, facilitating quicker restoration of operations.
Though the Recovery Plan's language suggests a minimum LTV of 80%, the NRB circular mentions a maximum of 80%, an inconsistency recommended to be aligned with the Plan for uniform application.
4. Payroll Protection Scheme to Safeguard Employment
Among the most impactful interventions is the Payroll Protection Scheme, which helps businesses retain employees during periods of non-operation. Loans under this scheme come with concessional interest rates capped at 0.5% above the base rate, markedly lower than prior premiums. Additionally, the Government of Nepal offers a 2% interest subsidy for the first six months through the National Reconstruction Fund, underscoring the commitment to job security.
Loans will be available for up to one year or until business reopening, with applications due by January 14, 2026. This assistance ensures businesses can meet payroll expenses without severe financial strain.
Conclusion
Nepal Rastra Bank's monetary relief measures represent a strategic effort to mitigate the economic impact of the Gen-Z Movement on affected businesses. By facilitating loan flexibility, reducing interest burdens, increasing loan-to-value ratios for critical assets, and supporting payroll continuity, NRB and the Government of Nepal are laying the groundwork for a resilient recovery.
For businesses navigating these challenging times, these policies provide vital financial lifelines. Further details and related economic recovery insights can be accessed at Infinity Partners Insights to stay updated on Nepal’s evolving economic support measures.
For official NRB regulatory information, please refer to the Nepal Rastra Bank’s website.
