Sectorwise Credit Analysis: Banks Focus on Energy and Transport While Trade Loans Decline

Nepal Rastra Bank’s mid-August 2025 sectorwise credit data reveals a clear realignment of bank lending priorities — a shift from trade and agriculture toward infrastructure, energy, and transport sectors. The total outstanding credit of banks and financial institutions reached Rs. 5.57 trillion, showing a mild contraction of Rs. 17.4 billion (−0.3%) compared to the previous month. While lending to agriculture and trade sectors declined, loans to energy, construction, and transport-related industries continued to expand, signaling a gradual reorientation of credit toward long-term, productive areas.

The electricity sector emerged as a key growth driver, with credit rising by Rs. 1.7 billion (0.4%) to Rs. 437.7 billion, reflecting Nepal’s ongoing investment push in hydropower and transmission infrastructure. Similarly, the transportation and communication sector recorded moderate gains, adding Rs. 2.2 billion (0.5%) — largely driven by vehicle imports and logistics financing. The construction sector, too, maintained a positive trajectory, with loans increasing by Rs. 1.48 billion (0.6%), supported by major highway and bridge projects across the country.

In contrast, the wholesale and retail trade sector saw a sharp contraction of Rs. 4.8 billion (−0.5%), pointing to subdued domestic demand and tighter working-capital lending conditions. Likewise, agricultural credit dropped by Rs. 5.7 billion (−1.4%), hit by weak seasonal demand, climate risks, and limited uptake of agri-finance products. Meanwhile, microfinance and small cooperatives also witnessed significant stress, with credit falling 10%, underlining the liquidity and repayment challenges at the grassroots level.

Economists note that this pattern indicates a strategic pivot of the banking system toward sectors aligned with Nepal’s medium-term growth agenda, especially hydropower, transport, and construction — while short-term, consumption-led lending is slowly tapering. However, the falling exposure to agriculture and trade raises concerns about inclusive growth and employment generation, particularly in rural economies.