General Reserves of Banks Grow by Rs. 100 Billion, Strengthening Capital Base

Nepal’s banking sector has shown a notable improvement in its financial strength, with general reserves of banks and financial institutions rising by Rs. 100.7 billion year-on-year, according to the latest Other Depository Corporation Survey published by Nepal Rastra Bank (NRB). The total general reserves reached Rs. 690.4 billion in mid-August 2025, compared to Rs. 589.7 billion in the same month of the previous year — marking a 17.1 percent annual growth.

The steady rise in general reserves indicates that banks are retaining more earnings rather than distributing them as dividends, in line with the central bank’s capital adequacy and prudential guidelines. This trend has strengthened the overall capital buffer and resilience of the financial system, enabling banks to better withstand potential credit shocks and market volatility.

Economists view this expansion in reserves as a reflection of the banking sector’s improved profitability and prudence in risk management. Despite sluggish credit growth in early 2025/26, banks have maintained a stable net interest margin, benefiting from improved liquidity, falling deposit rates, and conservative lending policies.

According to NRB officials, the buildup of reserves also enhances the sector’s compliance with Basel III capital standards, which require financial institutions to maintain a certain percentage of capital relative to risk-weighted assets. This, in turn, helps maintain public confidence in the financial system and supports long-term financial stability.

However, analysts caution that while a stronger capital base is positive for systemic soundness, excessive reserve accumulation could also indicate limited credit expansion — especially in the private sector, which remains a key driver of economic growth. Balancing profitability, risk, and credit flow will therefore remain a policy priority.