Net Domestic Credit Falls by Rs. 108 Billion in Nepal’s August 2025 Survey

Nepal’s net domestic credit contracted sharply by Rs. 108 billion in the month of August 2025 (Mid-August 2082), signaling tightening liquidity and cautious lending across the banking sector. According to the Monetary Survey data published by Nepal Rastra Bank (NRB), total domestic credit declined from Rs. 6.96 trillion in mid-July to Rs. 6.85 trillion in mid-August, marking a 1.6% monthly fall, one of the steepest in recent years.

The decline was primarily driven by a sharp drop in government borrowing, as the government’s net claims positiondecreased by Rs. 102 billion within a month due to improved cash surplus and lower reliance on short-term treasury instruments. This fiscal tightening reduced demand for domestic credit from the public sector.

Similarly, credit to other financial institutions also fell by Rs. 18.8 billion, reflecting lower interbank borrowing and a slowdown in wholesale lending activities. Despite these contractions, the private sector credit managed to post a modest increase of Rs. 12.6 billion (0.2%), showing resilience in business financing even amid tight liquidity and high interest rates.

Economists interpret this pattern as a temporary correction, noting that the large fiscal surplus and reduced government borrowing have absorbed excess liquidity from the market. However, if this trend continues, it could dampen credit expansion and investment momentum in the coming quarters.