NRB Report: Broad Money Liquidity (M3) Increases 12.5%, Reflecting Improved Financial Stability

The Nepal Rastra Bank (NRB) has reported that Broad Money Liquidity (M3) rose by 12.5% year-on-year, reaching Rs 7.96 trillion in mid-September 2025. This increase signifies stronger financial stability and steady liquidity expansion within the Nepalese banking system, driven by higher foreign reserves, strong remittance inflows, and balanced credit growth.

Liquidity Expansion Supported by External Sector

According to the Monetary Survey 2025/26, Net Foreign Assets (NFA) grew sharply by 36.8%, reaching Rs 2.88 trillion. This rise stemmed from a 34.3% jump in foreign exchange reserves to Rs 3.04 trillion, reflecting sustained remittance inflows, lower imports, and a positive balance of payments. Foreign liabilities rose only 0.7%, maintaining a strong net reserve position for the country.
These inflows have played a major role in bolstering liquidity across financial institutions, allowing banks to maintain stability while supporting gradual credit expansion.

Stable Domestic Credit and Controlled Fiscal Borrowing

The report also shows that domestic credit grew moderately by 5.5%, totaling Rs 6.9 trillion. Within this, private sector credit expanded by 7.3%, reaching Rs 5.71 trillion, indicating renewed business activity and lending confidence. Conversely, net claims on government declined by 5.6%, as government deposits rose nearly 49%, reflecting stronger revenue collection and restrained expenditure.
The Net Domestic Assets (NDA) increased by 1.9%, demonstrating stable internal liquidity conditions.

Monetary Composition Shifts Toward Liquidity

Within the money supply components, money supply (M1+) surged by 31.9%, driven by increases in currency in circulation, demand deposits, and saving deposits, while time deposits declined by 4.9% as savers preferred short-term liquidity.
The money multiplier (M2) rose to 7.16, signaling improved efficiency in the conversion of base money into broad liquidity. Reserve money increased by 10.1%, aligning with NRB’s aim of maintaining sufficient funds in the financial system without creating inflationary pressures.

Overall Financial Stability

The 12.5% expansion in M3 underscores a period of monetary resilience — where liquidity growth is supported by external inflows rather than excess domestic borrowing. NRB’s balanced monetary policy has successfully maintained financial stability, ensured adequate liquidity for banks, and controlled inflation risks.
Analysts interpret this trend as a healthy sign of macro stability, indicating that Nepal’s financial system continues to strengthen, aided by robust foreign assets and cautious domestic credit management.