Banking Khabar/ Banks will no longer be required to maintain an additional capital buffer, known as the countercyclical buffer. Nepal Rastra Bank (NRB) issued a circular announcing this change, relieving banks from the obligation to set aside this extra capital.
According to the NRB’s circular, effective from Shrawan 2081 (July 2024), the countercyclical buffer will be set at zero percent for the fiscal year 2081/82. Previously, the central bank had mandated this additional capital requirement at the end of the fiscal year 2079/80.
The requirement to maintain such a buffer is based on the relationship between the Gross Domestic Product (GDP) and credit growth. According to the Capital Framework 2015, NRB had imposed a 0.5% buffer capital requirement for the previous fiscal year. This framework stipulates that when the ratio or distance between GDP and credit growth ranges from 5 to 15 or higher, banks are required to hold an additional capital buffer of 0.5% to 2.5%. In the last fiscal year, banks were required to maintain an additional 0.5% capital buffer.
