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By Sandeep Chaudhary

Private Sector Credit Grows Rs. 12.6 Billion Despite Tight Monetary Conditions”

Private Sector Credit Grows Rs. 12.6 Billion Despite Tight Monetary Conditions”

Nepal’s private sector credit rose by Rs. 12.6 billion in August 2025, reaching Rs. 5.637 trillion, despite an increasingly tight liquidity environment and shrinking domestic assets. According to the Nepal Rastra Bank’s (NRB) latest monetary survey, the credit growth of just 0.2 percent reflects cautious optimism among businesses that continue to rely on short-term borrowing to sustain operations amid sluggish investment sentiment.

While credit growth slowed sharply compared to the post-pandemic recovery years, it remains positive even as the Net Domestic Assets (NDA) fell by Rs. 147 billion and the overall broad money supply (M2) declined by Rs. 58 billion in the same period. This indicates that credit expansion is now being supported primarily by strong external reserves rather than domestic liquidity.

Economists note that sectors such as trade, hydropower, construction, and services have continued to draw moderate levels of financing, driven by ongoing projects and seasonal business activity. However, demand for real estate and personal loans has softened due to high interest rates and tighter lending standards imposed by banks.

Experts warn that if the liquidity strain persists, banks could prioritize low-risk investments such as government bonds over private lending, which might further slow down economic momentum. Still, the gradual growth in private sector credit suggests that Nepal’s financial system is adapting to a more disciplined credit environment, balancing between macroeconomic stability and business needs.

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