Nepal’s Deposit-to-GDP Surpasses 118%: Banking Sector’s Expanding Role in the Economy

The latest financial indicators as of Saun End, 2082 (Mid-August 2025) highlight the expanding role of Nepal’s banking sector in mobilizing resources and fueling economic activity. The deposit-to-GDP ratio has surged to 118.57%, underscoring the sector’s strong capacity to channel household and institutional savings into the formal economy. Within this, commercial banks (Class “A”) dominate with a 106.21% contribution, while development banks and finance companies add 10.20% and 2.16% respectively. This reflects the public’s rising trust in the banking system and the preference for formal savings instruments.

On the credit side, the total credit-to-GDP ratio stands at 91.31%, with the overall Credit-to-Deposit (CD) ratio at 76.19%, indicating that banks are utilizing their deposits efficiently for lending while still maintaining regulatory headroom. However, smaller institutions such as development banks and finance companies show higher CD ratios, reflecting more aggressive lending strategies that could carry higher risk exposure.

In terms of deposit structure, fixed deposits account for 48.14% of the total, savings deposits 37.37%, while current and call deposits together make up around 14%. This heavy reliance on fixed deposits provides stability but also adds to banks’ interest costs. Meanwhile, asset quality remains a concern, with the non-performing loan (NPL) ratio at 4.62% overall, rising to over 11% in finance companies. To mitigate risks, loan loss provisions (LLPs) are maintained at 5.09% of total loans.

Liquidity indicators remain robust with total liquid assets at 23.74% of deposits and investments in government securities at 15.15%, reflecting prudent balance sheet management. Capital adequacy also remains above regulatory requirements, with Core Capital to Risk-Weighted Assets (RWA) at 10.04% and Total Capital to RWA at 13.19%, providing resilience against shocks.

Financial access has grown significantly, with 6,526 branches nationwide, over 60 million deposit accounts, and nearly 20 million loan accounts. Digital penetration is remarkable—27.9 million mobile banking customers and 2.25 million internet banking users—signaling a strong shift toward digital financial services. Card-based transactions also show growth with more than 13.6 million debit cards and over 318,000 credit cards in circulation.

The weighted average deposit rate is 4.02%, while the average lending rate is 7.76%, maintaining a spread of around 3.7%. While this ensures profitability for banks, the declining deposit rates may challenge future savings mobilization if inflationary pressures persist.