The Reserve Bank of Nepal (NRB) has authorized commercial banks to invest in foreign government bonds, a policy change set to take effect from the start of the next fiscal year.
The decision, reported by myRepublica, expands the investment mandate for Nepal's banking sector, which has historically been constrained to domestic instruments and limited foreign currency assets.
This regulatory shift allows Nepalese banks to diversify their reserve portfolios beyond traditional holdings, potentially improving returns on idle foreign exchange reserves.
For market participants, the move signals a gradual liberalization of the financial sector, aligning Nepal's banking regulations more closely with regional peers that permit broader sovereign debt exposure.
The timing of the announcement follows a period of tightening liquidity conditions in Nepal's domestic money market.
By permitting banks to deploy funds into international sovereign bonds, the central bank aims to provide an alternative outlet for excess liquidity, which could help stabilize domestic interest rates.