NRB Balance Sheet: Reserve Money Rises 13.9% as Currency in Circulation Expands

Nepal Rastra Bank’s latest balance sheet for mid-August 2025 reveals a significant rise in reserve money, which increased by 13.9 percent (Rs. 133 billion) compared to the previous year, reaching Rs. 1.09 trillion. This growth in reserve money—often referred to as the base money or high-powered money—was primarily driven by an expansion in currency circulation and bank reserves.

According to the data, currency outside banks surged by Rs. 77.7 billion (13.4%) to Rs. 656 billion, reflecting continued public preference for holding cash in hand amid liquidity uncertainties in the banking sector. At the same time, commercial banks’ deposits at NRB rose by Rs. 61.6 billion (25.1%), while deposits of development banks and finance companies also recorded notable increases. These components directly contributed to strengthening the overall monetary base.

Analysts note that while the expansion of reserve money indicates higher monetary liquidity in the financial system, it also underscores Nepal’s persisting dependence on cash-based transactions. Despite digital banking growth, a large portion of the economy still operates through physical currency, which may create challenges in monetary policy transmission.

The central bank, however, sees this rise in reserve money as a reflection of stronger foreign exchange inflows and higher government deposits, which have added to the domestic liquidity pool. Yet, experts warn that unless managed carefully, the rising money supply could fuel inflationary pressures, particularly when private sector credit demand picks up.