Loans and Advances by Financial Institutions Reach Rs. 7 Trillion Despite Modest Growth

Nepal’s financial institutions have maintained steady credit expansion, with total loans and advances reaching Rs. 7.06 trillion by mid-August 2025, according to the Nepal Rastra Bank’s Other Depository Corporation Survey. Despite the large figure, growth remained modest at −0.2 percent, reflecting the ongoing slowdown in credit demand amid tight monetary conditions and cautious lending policies.

The data shows that private sector lending continues to dominate, accounting for over Rs. 5.62 trillion, up slightly by Rs. 12.5 billion from the previous month. However, this marginal increase indicates subdued investment appetite from businesses and households, largely due to high borrowing costs and uncertain economic recovery.

In contrast, claims on government and public enterprises declined, while lending to non-bank financial institutions also dropped by around 6 percent, showing reduced inter-institutional borrowing activity. Analysts suggest that banks are focusing more on managing liquidity and maintaining balance sheet quality rather than aggressive loan expansion.

Economists note that while the stability of the Rs. 7 trillion credit base highlights the resilience of Nepal’s banking system, the lack of robust loan growth signals weak private investment momentum, which may affect broader economic recovery targets for FY 2025/26.