Money Supply (M1+) Grows 31.9% While Time Deposits Decline 4.9% – NRB Monetary Indicators 2025/26

The Nepal Rastra Bank (NRB) has reported a significant expansion in the money supply (M1+) and a notable decline in time deposits, reflecting shifting liquidity preferences within the banking sector. According to the Monetary Survey (Mid-September 2025), the M1+ aggregate — which includes currency in circulation, demand deposits, and saving/call deposits — rose by 31.9% year-on-year, while time deposits contracted by 4.9%.

Rise in M1+ Reflects Strong Deposit Mobilization

The total M1+ money supply reached Rs 4.36 trillion in mid-September 2025, compared to Rs 3.30 trillion a year earlier. This sharp rise indicates growing public confidence in the banking system and an increased preference for short-term and liquid assets.
Within M1+, currency in circulation grew by 13.8%, reaching Rs 651.9 billion, while demand deposits jumped by 26%, signaling higher business and consumer transactional activities.
The most striking increase came from saving and call deposits, which surged 36.9%, reaching Rs 3.29 trillion — a reflection of rising remittance inflows and households’ inclination to keep funds easily accessible amid steady interest rate trends.

Decline in Time Deposits

In contrast, time deposits — representing fixed-term bank savings — declined by 4.9% to Rs 3.51 trillion, down from Rs 3.69 trillion a year earlier. The contraction indicates that depositors are shifting away from long-term savings products towards more liquid accounts, likely due to moderate deposit rates, receding inflation expectations, and a preference for liquidity flexibility in uncertain global and domestic market conditions.
This trend suggests a potential challenge for banks seeking long-term stable funding but provides greater flexibility in supporting short-term credit growth.

Overall Monetary Position

Despite the changes in deposit composition, Nepal’s broad money (M2) expanded by 12.4% year-on-year to Rs 7.87 trillion, supported by rising foreign exchange reserves and private sector credit growth of 7.3%. The increase in M1+ combined with declining time deposits has resulted in a more liquid financial environment, aligning with NRB’s policy of maintaining balanced liquidity to stimulate credit expansion without excessive inflation.

Policy and Economic Implications

The expansion in M1+ demonstrates improved economic liquidity, higher transaction volumes, and stronger confidence in the formal financial system. However, the drop in time deposits may prompt NRB and banks to revisit interest rate structures to sustain stable funding. The overall liquidity pattern reflects a transition toward short-term financial flexibility, typical in periods of moderate recovery and external stability.