NRB Data: Financial Institutions’ Liquid Funds Drop by 4.4% Due to Lower Balances with NRB

Nepal’s financial institutions experienced a notable decline in liquidity in August 2025, as total liquid funds dropped by Rs. 33.3 billion (−4.4%), according to the Nepal Rastra Bank’s (NRB) latest depository corporation survey. The fall in liquidity was primarily driven by a sharp reduction in balances held with the central bank (NRB), indicating tighter money market conditions despite stable deposit mobilization.

The data shows that liquid funds decreased to Rs. 723.2 billion from Rs. 756.5 billion in July. Among its components, balances with NRB fell by Rs. 58.7 billion (−14.8%), marking the steepest monthly drop. Likewise, cash in hand with banks declined by Rs. 6 billion (−6.2%), suggesting reduced on-hand liquidity. However, balances held abroad increased by Rs. 31.5 billion (+12.2%), reflecting a rise in foreign placements by banks — possibly to take advantage of higher returns on global deposits.

Economists attribute this liquidity squeeze to government deposit accumulation in NRB and subdued credit growth in the private sector. As the government’s cash surplus remains high, financial institutions are finding it harder to access domestic liquidity through NRB facilities.

Despite the short-term tightening, the overall liquidity scenario remains manageable, aided by stable remittance inflows and improving deposit trends in savings and call accounts. However, if NRB does not inject additional liquidity, interest rates in the interbank market may rise in the coming weeks.