Foreign Liabilities of Financial Institutions Increase 4.5% as Borrowings from Abroad Expand

Nepal’s financial institutions have seen a moderate rise in external borrowings, with foreign liabilities increasing by 4.5 percent in mid-August 2025, according to the latest Other Depository Corporation Survey by the Nepal Rastra Bank. The total foreign liabilities reached Rs. 34.7 billion, up from Rs. 33.2 billion a month earlier, signaling renewed access to overseas credit and external financing sources.

Analysts suggest that this increase reflects the efforts of commercial banks and other financial institutions to diversify their funding base amid domestic liquidity pressures. As deposit growth remains subdued, some banks have turned to external borrowing facilities, particularly short-term credit lines from regional and international lenders.

The rise in external liabilities, however, also underscores potential currency and refinancing risks, especially if global interest rates remain high or if the Nepali rupee weakens further. Economists warn that while controlled foreign borrowing can help ease liquidity constraints, excessive exposure could increase future repayment burdens.

Despite these concerns, the 4.5% rise indicates a strategic attempt by the financial sector to balance liquidity needs and funding diversification, aligning with Nepal Rastra Bank’s cautious approach to external debt management.