Nepal Rastra Bank’s Reserve Money Falls by 5% Despite Strong Growth in Foreign Assets – NRB Report

The latest Central Bank Survey (Mid-September 2025) by the Nepal Rastra Bank (NRB) shows a mixed monetary trend where the nation’s foreign assets increased sharply, but reserve money declined notably. According to the report, NRB’s total foreign assets climbed by Rs 182.04 billion (7.1%), reaching Rs 2.74 trillion, mainly due to higher foreign exchange reserves and gold investments. Foreign exchange holdings rose by Rs 167.7 billion (6.9%), reflecting strong remittance inflows, better current account performance, and reduced import pressure, while gold investment jumped by 12% to Rs 132.05 billion, indicating a diversification strategy in reserve management. These improvements have strengthened Nepal’s external sector, ensuring stability in the exchange rate and adequate import coverage.

Despite this external strength, reserve money (base money) — the foundation of the country’s liquidity — fell by 5% to Rs 1.09 trillion in mid-September 2025. The drop was primarily driven by a 15.2% decline in commercial banks’ deposits held at NRB, alongside liquidity absorption measures such as deposit auctions and standing deposit facilities. Currency outside the banking system also fell slightly, showing that NRB is maintaining tight control over money supply to prevent inflationary risks. Another key factor behind this decline was the surge in government deposits, which almost doubled — rising by 95.5% to Rs 255.6 billion — as revenue collection increased and fiscal discipline strengthened. This accumulation of government funds absorbed liquidity from the financial system, reducing overall reserve balances in the short term.

Meanwhile, the NRB’s own financial position strengthened, with capital and reserves rising by 14.7% to Rs 681.28 billion and total assets and liabilities expanding by 7% to Rs 2.84 trillion. This balance sheet growth, despite a contraction in reserve money, indicates NRB’s effective monetary management and its focus on maintaining macroeconomic stability. In summary, the NRB report highlights that while foreign assets surged by Rs 182 billion, reserve money contracted by Rs 58.3 billion, reflecting a deliberate policy stance to ensure price stability and control liquidity amid a strengthening external reserve position.