Nepal’s Broad Money (M3) Crosses Rs 7.95 Trillion, Supported by Rising Foreign Reserves and Deposits

According to the Nepal Rastra Bank’s (NRB) Monetary Survey for mid-September 2025, Nepal’s broad money liquidity (M3) reached Rs 7.96 trillion, marking a 0.4% increase over the past two months. The expansion was primarily driven by rising foreign exchange reserves and a steady increase in bank deposits, while domestic credit growth remained moderate.

Foreign Sector Drives Liquidity Growth

The NRB data reveal that net foreign assets (NFA) grew by Rs 153.68 billion (5.8%), pushing the total to Rs 2.88 trillion. This growth was fueled by a significant rise in foreign exchange reserves, which climbed to Rs 3.04 trillion— an increase of 7.7% compared to mid-July 2025. The central bank attributed the improvement to robust remittance inflows, lower import payments, and stable tourism receipts, strengthening Nepal’s external liquidity position.

Deposits Expand Amid Liquidity Stability

The report also shows a rise in overall bank deposits, especially in saving and call deposits, which increased by 4.5%to reach Rs 3.29 trillion. This deposit growth reflects strong public confidence in the banking system and consistent inflow of household and remittance funds. In contrast, time deposits fell slightly by 0.5%, while demand depositsdeclined by 18.8%, signaling subdued short-term transactional activity in the market.

Despite these shifts, total broad money (M2) rose by 0.3% to Rs 7.87 trillion, supported by external sector strength. The rise in M3 — which includes M2 plus other liquid assets — highlights improved liquidity management within the banking system.

Domestic Credit and Fiscal Position

On the domestic side, net domestic assets (NDA) decreased by Rs 126.99 billion (–2.5%), mainly due to a 12.9% fall in net claims on government, as government deposits surged by nearly 96% to Rs 255.6 billion. Private sector credit, however, continued to expand modestly by 1.6%, reflecting stable but cautious lending activity.

Economic Interpretation

Economists view the data as a sign of monetary resilience — foreign reserves are increasing, liquidity is improving, and the banking sector remains stable without excessive credit expansion. The money multiplier for M2 rose to 7.16, indicating better liquidity efficiency and stronger reserve utilization across banks.

NRB’s current policy stance — balancing liquidity injection with fiscal discipline — has allowed steady money growth while controlling inflationary pressures.