Banks Reduce Agriculture Exposure as Forest and Fish Farming Loans Shrink

According to the Nepal Rastra Bank’s Sectorwise Credit Report for Mid-August 2025, Nepal’s banking and financial institutions have reduced their exposure to the agriculture sector, marking a decline of 1.4% (Rs. 5.7 billion) within a month. The total outstanding credit to agriculture fell to Rs. 412.17 billion, compared to Rs. 417.88 billion in July 2025. The contraction was mainly driven by declining loans in forest, fish farming, and other allied agricultural activities, which together recorded a noticeable dip after months of stagnation.

Within the sector, forest, fish farming, and slaughter-related loans fell from Rs. 3.26 billion to Rs. 3.18 billion (a drop of 2.5%), reflecting cautious lending by banks due to slow repayment trends and lower demand from small-scale farmers. Similarly, “Other Agriculture and Agricultural Services” — which includes agro-processing and rural supply chains — dropped by Rs. 4.3 billion (down 2.4%) as banks reportedly shifted focus toward more stable and profitable segments like production, construction, and energy.

Loans to traditional farming services also slipped marginally by 1.5%, while credit to animal husbandry and dairy farming remained flat, suggesting that banks are being conservative amid weather uncertainties and volatile commodity prices. However, some positive momentum was observed in tea farming and high-value crops, where specialized cooperatives and niche exporters continued to attract targeted financing.

Experts note that the decline in agricultural lending highlights a structural imbalance in Nepal’s credit distribution, where productive rural sectors continue to receive minimal attention compared to urban-centric industries. While the government has repeatedly emphasized agricultural modernization and value-chain financing, the data suggests that banks remain hesitant due to risk, limited collateral, and slower returns in this segment.