Broad Money Liquidity (M3) Crosses Rs. 7.8 Trillion: Key Monetary Insights

Nepal’s Broad Money Liquidity (M3) has crossed Rs. 7.87 trillion as of mid-August 2025, marking a 12.4% year-on-year increase, according to Nepal Rastra Bank’s Monetary Survey. The steady expansion in liquidity indicates that the banking system continues to hold sufficient funds to support credit growth and public sector financing — though challenges remain in channeling liquidity into productive investments.

The rise in broad money reflects the combined effects of growing net foreign assets (up by Rs. 752 billion or 36.9%)and a modest increase in net domestic assets (Rs. 110 billion or 2.3%). Strong remittance inflows and higher foreign exchange reserves have bolstered the external side of liquidity, while gradual recovery in private sector credit has sustained internal monetary momentum.

Within the structure of broad money, narrow money (M1) increased by 17.3%, showing higher cash circulation and deposits readily available for transactions, whereas savings and call deposits surged nearly 39%, signaling improving confidence among savers. However, time deposits declined by 5.2%, suggesting a shift from long-term to more flexible saving instruments amid fluctuating interest rates.

Economists say the current liquidity level provides a strong cushion for banks, allowing them to manage short-term obligations comfortably. Yet, they caution that without parallel growth in productive credit demand, excess liquidity could contribute to asset bubbles or inflationary pressure later in the year.