Manufacturing Credit Up 0.8% — Cement, Iron and Steel Plants Lead the Recovery

According to the Nepal Rastra Bank’s latest sectoral credit data for Mid-August 2025, credit to the manufacturing and production sector recorded a modest but steady rise of 0.8%, reaching Rs. 890.79 billion compared to Rs. 884.05 billion a year earlier. This increase, though small, indicates a gradual recovery in Nepal’s industrial activity, primarily driven by renewed investment in cement, iron, and steel plants — key sectors that underpin construction and infrastructure growth.

The cement industry saw its outstanding loans climb by 1.5%, rising from Rs. 131.39 billion to Rs. 133.37 billion, reflecting higher demand for domestic cement production amid stable construction activity. Similarly, loans to iron and steel plants rose by 1.5% to Rs. 164.88 billion, supported by ongoing public infrastructure projects and gradual recovery in private sector demand for building materials. These two industries together accounted for nearly one-third of total production-sector credit, showing their crucial role in industrial financing.

Beyond heavy industries, other sub-sectors also contributed to the growth. Plastic production loans increased by 1.7%, while food processing and chemical manufacturing remained stable. However, some traditional segments — including handicrafts, textile, and paper industries — reported minor contractions due to sluggish export demand and higher operating costs.

Economists suggest that the rebound in production-related credit signals the return of industrial confidence after two years of weak expansion. Improved power supply, eased import restrictions on industrial raw materials, and better liquidity conditions in the banking system have supported this turnaround. Still, the manufacturing recovery remains uneven, with small-scale and export-oriented industries facing persistent challenges from high production costs and weak foreign demand.