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#NepalEconomy #CurrencyInCircu
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By Sandeep Chaudhary

Currency in Circulation Up 13.4%: Cash Dependency Still Rising in Nepal

Currency in Circulation Up 13.4%: Cash Dependency Still Rising in Nepal

Nepal’s reliance on physical cash continues to rise, with currency in circulation climbing by 13.4 percent year-on-yearas of mid-August 2025, according to the latest Monetary Survey by Nepal Rastra Bank. The amount of currency circulating outside the banking system reached Rs. 656 billion, compared to Rs. 578 billion a year earlier, underscoring the country’s continued dependence on cash transactions despite rapid digitalization in other sectors.

Economists suggest that the sustained growth in cash circulation reflects both informal economic activity and low financial inclusion in rural areas. While digital payment platforms such as mobile wallets, QR payments, and e-banking have expanded rapidly in cities, many businesses and consumers outside urban centers still rely heavily on physical cash for daily transactions.

The rise in cash circulation also aligns with seasonal and festival-related spending patterns, as the first months of Nepal’s fiscal year often coincide with agricultural harvests and pre-festival consumption. However, such an increase also points to liquidity leakage from the formal banking system, which may slow down deposit growth and complicate monetary management.

Analysts caution that a persistently high share of cash in total money supply (M1) can reduce the efficiency of monetary policy transmission, making it harder for interest rate adjustments to influence lending and investment. The continued rise in physical cash, they argue, signals that Nepal’s transition toward a cash-lite economy is progressing slower than expected.

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