Loans to Private Sector from Financial Institutions Cross Rs. 5.6 Trillion in Mid-August 2025

Nepal’s financial institutions have crossed a major milestone in private sector lending, as total credit to the private sector reached Rs. 5.63 trillion by mid-August 2025, according to Nepal Rastra Bank’s latest Other Depository Corporation Survey. The data shows a Rs. 12.5 billion increase (0.2%) in one month, reflecting cautious but continuous credit expansion despite tight monetary conditions and sluggish deposit growth.

Out of the total loans, non-financial private corporations account for the largest share at Rs. 3.44 trillion, while household loans stood at Rs. 2.04 trillion, indicating robust demand for personal and business financing. The growth, though modest compared to previous years, highlights gradual recovery in investment confidence following months of liquidity pressure and cautious banking operations.

Interest-accrued loans rose by Rs. 15.4 billion (13%), suggesting a buildup in unpaid interest segments — a signal of repayment stress among certain borrowers. Analysts note that while credit growth remains positive, the quality of assets needs close monitoring as non-performing loans (NPLs) could rise if repayment trends do not improve.

NRB’s data indicates that commercial banks remain the dominant players, holding over 80% of total private sector loans, followed by development banks and finance companies. The private sector credit-to-GDP ratio continues to hover around 80%, underlining the sector’s reliance on banking finance.

Economists believe the subdued credit growth points to a cautious stance by banks, aligning with NRB’s focus on monetary stability. However, they warn that excessive caution could slow economic momentum if investment financing does not pick up in the coming quarters.