Loan Growth vs Deposit Growth The Balancing Challenge

Nepal’s banking sector has always faced the delicate task of balancing deposit mobilization with loan expansion. As per Nepal Rastra Bank’s July 2025 supervision data, total deposits in commercial banks reached Rs. 65.41 trillion, while loans stood at Rs. 49.63 trillion, pushing the overall Credit-to-Deposit (CD) Ratio to 76.63%. This figure reflects a cautiously balanced sector, but under the surface, banks face very different challenges.

State-owned banks like Rastriya Banijya Bank (CD Ratio 62.27%) and Nepal Bank (71.10%) are highly liquid and conservative in lending. This shows that they mobilize deposits effectively but lend less aggressively, prioritizing depositor safety over high returns. In contrast, private banks such as Nabil Bank (82.48%), NIC Asia (76.72%), and Prime Commercial Bank (83.37%) operate with much tighter deposit-to-loan balances, pushing towards higher profitability but also running closer to the regulatory ceiling.

The Agriculture Development Bank (72.82%) and Everest Bank (77.44%) fall in the middle, maintaining healthy growth in lending without overstretching their deposit base. Meanwhile, NMB (84.31%) and Citizens Bank (84.45%)reflect aggressive credit expansion relative to deposits, which boosts market share but leaves less cushion during liquidity stress.

For investors and regulators, the challenge lies in ensuring that banks expand credit to support economic growth without endangering liquidity. Over-aggressive loan growth can lead to future Non-Performing Loan (NPL) risks, while excessive deposit hoarding reduces profitability. Thus, the healthiest banks are those that maintain CD Ratios around 70–80%, balancing growth and stability.