NRB Financial Update 2025/26: Deposit Rate Falls to 3.96%, Lending Rate at 7.66%

The Nepal Rastra Bank (NRB), in its Mid-September 2025/26 Financial and Monetary Review, has highlighted a significant easing in interest rates across the banking sector — a reflection of improved liquidity conditions and a more stable macroeconomic environment. According to the report, the weighted average deposit rate of commercial banks has dropped to 3.96%, while the average lending rate now stands at 7.66%, marking a noticeable decline compared to the double-digit rates observed over the past few years.

This decline in rates is attributed to abundant liquidity in the banking system, moderate credit demand, and a cautious monetary stance by NRB. The central bank’s efforts to manage liquidity through its deposit collection and open market operations have successfully maintained balance in the financial system. The base rate of banks also fell to 5.72%, compared to 7.48% a year earlier, reflecting a softening interest rate structure throughout the market.

Lower deposit rates suggest that banks are currently holding excess liquidity, driven by rising deposits and slower credit expansion. As of mid-September 2025/26, total deposits stood at Rs. 7.29 trillion, up from Rs. 6.49 trillion in the previous year, representing a healthy 12.4% annual growth. On the lending side, credit to the private sector reached Rs. 5.54 trillion, growing by 7.3%, signaling cautious lending practices amid moderate economic activity.

The monetary environment is further supported by stable inflation, which has fallen sharply to 1.87%, allowing NRB to maintain an accommodative policy stance. The interbank rate among commercial banks averaged 2.74%, showing consistent liquidity flow between institutions. Similarly, T-bill rates have declined, with the 91-day Treasury Billyielding 2.13%, compared to 2.89% last year. These movements indicate a well-calibrated financial system, where short-term and long-term interest rates are gradually aligning with macroeconomic stability.

Economists interpret the fall in lending and deposit rates as a positive signal for borrowers and investors, as cheaper credit can help stimulate business activities, investment, and capital market performance. The NEPSE Index, which closed at 2,672 points, and a market capitalization equivalent to 73.1% of GDP, reflect improving investor confidence. However, the lower deposit returns may discourage savers, requiring banks to strike a balance between deposit mobilization and lending growth.

While the declining rate environment supports economic recovery, NRB has emphasized the need for credit expansion toward productive sectors rather than speculative areas such as real estate or margin lending. The central bank’s priority remains maintaining financial discipline while promoting sustainable credit flow to key industries, agriculture, and infrastructure.