Loans and Advances Cross Rs. 7 Trillion Mark Despite Slower Credit Expansion

Nepal’s banking and financial sector has surpassed a major milestone, with total loans and advances crossing Rs. 7 trillion in mid-August 2025, according to the Other Depository Corporation Survey released by Nepal Rastra Bank (NRB). Despite a sluggish lending environment, the aggregate credit figure reached Rs. 7.06 trillion, showing that banks continue to expand their loan portfolios, albeit at a more cautious pace.

Compared to the previous year, overall loans and advances grew by 5.9 percent, while the month-on-month figure remained nearly flat (−0.2 percent). The credit distribution pattern reflects a moderation in private-sector borrowingamid tighter monetary conditions, political uncertainty, and subdued investment appetite in both manufacturing and real-estate sectors.

Within total lending, claims on the private sector stood at Rs. 5.63 trillion — up 7.7 percent year-on-year — confirming that private borrowers still drive the majority of banking credit. Government-related lending, however, declined slightly to Rs. 1.13 trillion as the fiscal sector relied more on development bonds and treasury instruments rather than bank credit.

Analysts note that while the rise beyond the Rs. 7 trillion mark highlights the depth and size of Nepal’s financial system, the slower pace of expansion signals that banks are prioritizing balance-sheet health over aggressive growth. Liquidity remains comfortable, yet risk aversion among lenders persists as non-performing assets hover near regulatory limits.

NRB officials emphasize that maintaining credit quality will be key in the months ahead, especially as the economy gradually recovers from past slowdowns. A balanced approach — encouraging productive-sector lending while curbing speculative borrowing — will be essential for sustaining stable credit growth without fueling inflationary pressure.