Nepal Rastra Bank Reports 21.96% Net Income Growth in FY 2080/81

Nepal Rastra Bank (NRB) has released its financial report for the fiscal year 2080/81 (2023/24), showcasing robust growth across several financial metrics. The central bank recorded a net income of NPR 73.76 billion, a 21.96% increase compared to the previous fiscal year. This growth reflects the bank's improved management of foreign exchange and asset revaluation, which contributed significantly to the overall profitability.

The bank's board has decided to allocate NPR 37.22 billion of its profits to the government after fulfilling reserve requirements. This substantial contribution underscores NRB's role in bolstering national finances amidst a challenging economic environment.

Asset Expansion and Liquidity Management

NRB's total assets and liabilities reached NPR 2.067 trillion, marking a 30.15% year-on-year growth. The bank managed liquidity prudently, absorbing NPR 4.673 trillion while injecting NPR 804.76 billion into the economy through open market operations. A permanent liquidity facility worth NPR 1.2 billion was also utilized.

This liquidity management indicates NRB's efforts to stabilize the financial market and ensure adequate capital availability for economic activities.

Sectoral Analysis: Growth and Challenges

Commercial banks, development banks, and finance companies all recorded significant growth in assets, with increases of 12.9%, 7.9%, and 11.2%, respectively. However, microfinance institutions faced a decline of 1.3% in their total assets, signaling potential challenges in serving rural and low-income populations.

The report also highlights improvements in the Deposit and Credit Guarantee Fund, which secured NPR 257.72 billion in loans and NPR 1.430 trillion in deposits, demonstrating efforts to build public confidence in the banking system.

Foreign Exchange Reserves and Trade Performance

NRB's foreign exchange reserves stood at NPR 2.041 trillion (USD 15.27 billion), sufficient to cover 15.6 months of goods imports and 13 months of goods and services imports. This reserve level highlights the country's improved external position, providing a buffer against potential economic shocks.

On the trade front, total exports declined by 3% to NPR 152.38 billion, while imports decreased by 1.2% to NPR 1.592 trillion. The trade deficit narrowed by 1% to NPR 1.440 trillion, representing 25.3% of the GDP. These trends suggest some progress in managing the country’s reliance on imports, though export performance remains a concern.

Government Revenue and Spending

The government collected NPR 1.082 trillion in revenue during the fiscal year, while total expenditure reached NPR 1.408 trillion. This revenue-expenditure gap reflects persistent fiscal challenges, emphasizing the need for better resource mobilization and expenditure control.

Interpretation: A Balancing Act

NRB's report demonstrates a careful balancing act between maintaining financial stability and supporting economic growth. The bank’s improved income, strategic liquidity management, and robust foreign exchange reserves highlight its effectiveness in navigating complex economic dynamics. However, challenges such as declining exports and reduced microfinance assets require targeted interventions to ensure inclusive growth.

This report underscores NRB's pivotal role in steering Nepal’s economy through uncertainty, positioning itself as a cornerstone for fiscal stability and economic development.