Nepal’s commercial banks face lending crunch despite rising deposits

March 17, 2025, 02:04:02 PM |

KATHMANDU: Nepal’s commercial banks are grappling with a lending slowdown despite a steady rise in deposits, as the credit-deposit (CD) ratio hovers at 79.29 percent by the end of Falgun in the fiscal year 2081/82 (March 2025). The Nepal Rastra Bank (NRB) has urged banks to push this ratio to 90 percent, but internal challenges, including the inability to recover existing loans, have left them unable to meet this target.

Data reveals that 20 commercial banks amassed NPR 60.37 trillion in deposits by Falgun’s end, reflecting public savings funneled through various accounts. From this pool, NPR 48.50 trillion has been disbursed as loans. While banks theoretically have room to lend an additional NPR 6.5 billion, the Nepal Bankers Association highlights a key hurdle: sluggish loan recovery is stifling new credit expansion.

The past 10 months paint a mixed picture. Deposits grew from NPR 57.88 trillion in Bhadra to NPR 60.37 trillion by Falgun, a rise of NPR 2.48 trillion. However, the journey wasn’t smooth—collections dipped in Asoj (NPR 59.22 trillion) and Kartik (NPR 59.03 trillion) before climbing back in Mangsir (NPR 59.37 trillion), Poush (NPR 59.87 trillion), and Magh (NPR 59.97 trillion). Loan disbursement followed a similar uneven trend, dropping slightly in Asoj (NPR 46.79 trillion) from Bhadra (NPR 46.81 trillion), then rising modestly in Kartik (NPR 47.21 trillion) and more steadily through Poush (NPR 48.15 trillion), Magh (NPR 48.27 trillion), and Falgun (NPR 48.50 trillion).

Bank-specific CD ratios vary widely, with Rastriya Banijya Bank at a low 63.86 percent and Machhapuchhre Bank leading at 85.65 percent. The average stands at 79.77 percent, well below NRB’s ceiling. Analysts suggest that while deposit growth signals public trust, the banking sector’s cautious approach to lending could hinder economic momentum unless recovery mechanisms improve. As of March 17, 2025, this liquidity conundrum remains a critical challenge for Nepal’s financial landscape.

Fiscal Nepal |

Monday March 17, 2025, 02:04:02 PM |