Liquidity Position of Banks and Financial Institutions Shows Stability: NRB Report

According to the latest financial indicators released by Nepal Rastra Bank as of Jeth End, 2082 (Mid-June 2025), the overall liquidity position of Class "A", "B", and "C" banks and financial institutions (BFIs) remains stable, indicating a healthy buffer of liquid assets across the sector.

The Cash & Bank Balance to Total Deposit ratio stood at 7.45% overall, with Class "A" commercial banks maintaining the highest liquidity at 7.59%, followed by Class "C" finance companies at 6.91%, and Class "B" development banks at 6.16%. This ratio reflects the immediate cash available with institutions, and the data suggests that commercial banks have slightly higher on-hand liquidity to meet withdrawal demands compared to others.

In terms of Investment in Government Securities to Total Deposit, the average across all classes was 16.34%, highlighting a strong inclination towards risk-free assets. Class "A" banks again led this metric with a notable 16.66%, followed by Class "B" banks at 14.05% and Class "C" institutions at 11.71%. This demonstrates that commercial banks are contributing significantly to government financing and maintaining a conservative asset strategy.

The overall Total Liquid Assets to Total Deposit ratio was reported at 24.74%, indicating a robust liquidity cushion across the sector. Class "A" banks reported a 25.01% ratio, suggesting strong asset-liability management. Class "C" finance companies followed closely with 23.86%, while Class "B" development banks posted 22.10%.

These liquidity ratios reveal that the banking and financial system in Nepal is currently operating within sound prudential limits. The slightly higher liquidity ratios among commercial banks are a result of stricter regulatory requirements and higher deposit volumes. Meanwhile, lower ratios in Class "B" and "C" institutions indicate tighter liquidity positions but still within acceptable thresholds. The continued preference for government securities also reflects cautious lending behavior amid fluctuating credit demand and evolving market dynamics.

Overall, the financial system appears well-prepared to withstand short-term liquidity shocks, providing a sense of stability and confidence to depositors and investors alike.