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By Sandeep Chaudhary

Monetary Survey 2025: Key Insights on Nepal’s Money, Credit, and Liquidity

Monetary Survey 2025: Key Insights on Nepal’s Money, Credit, and Liquidity

Nepal Rastra Bank’s Monetary Survey for Mid-August 2025 (2075/76) paints a mixed picture of the economy — foreign reserves and deposits are rising, but domestic credit and money supply have contracted, reflecting tight liquidity and cautious lending.

According to the survey, Nepal’s net foreign assets (NFA) increased sharply by Rs. 89 billion (+3.4%) within a month, reaching Rs. 2.79 trillion, driven by strong remittance inflows and robust external reserves totaling Rs. 2.95 trillion. This expansion in foreign assets has strengthened Nepal’s external position, boosting confidence in the rupee’s stability and import capacity.

However, net domestic assets (NDA) declined by Rs. 147 billion (−2.8%), reflecting sluggish credit growth, high government deposits, and limited private sector borrowing. Total domestic credit fell by Rs. 108 billion (−1.6%), as both government and financial institutions reduced borrowing levels. In contrast, private sector credit saw a modest rise of Rs. 12.6 billion (+0.2%), indicating selective lending amid rising risk aversion among banks.

The survey also reveals a decline in the broad money supply (M2) by Rs. 58 billion (−0.7%), signaling tightening liquidity across the financial system. Money supply (M1) — including cash and demand deposits — contracted by 9.8%, largely due to a Rs. 114 billion drop in demand deposits, which suggests lower transaction-level liquidity in the market.

Interestingly, saving and call deposits rose by Rs. 77 billion (+2.4%), showing that depositors are shifting from current accounts to interest-bearing accounts as they seek higher returns in a rising interest rate environment. Meanwhile, time deposits slightly fell by Rs. 21 billion (−0.6%), indicating that short-term savings remain more popular than long-term fixed instruments.

Economists say this pattern represents a period of monetary tightening with cautious optimism — while the banking sector’s foreign asset position is strong, liquidity pressures persist domestically due to slower credit expansion and large government cash holdings. The overall outlook points toward financial stability with moderate growth, contingent upon sustained remittance inflows and gradual credit recovery.

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