Deposits surge but credit growthslows in banking sector

Kathmandu, April 5: The banks and financial institutions (BFIs) recorded strong deposit growth up to mid-March 2026, while credit expansion showed signs of moderation, pointing to a cautious economic environment.

According to a current macro-economic and financial situation report made public by Nepal Rastra Bank recently, the deposits at BFIs rose by 6.6 per cent (Rs. 482.01 billion), reaching Rs. 7,745.88 billion, a notable improvement compared to a 4.3 per cent increase during the same period last year.

On a year-on-year basis, deposits expanded by an impressive 15.1 percent in mid-March 2026, reflecting improved liquidity conditions in the banking system.
The share of saving deposits climbed significantly to 44.1 percent from 35.4 per cent a year ago, while fixed deposits declined to 40.1 percent from 51.7 percent.

Demand deposits also increased slightly to 6.6 per cent. The share of institutional deposits in total deposit of BFIs stood at 34.3 percent in mid-March 2026. Such a share was 35.4 per cent a year ago.

On the lending side, private sector credit grew by 4.4 per cent (Rs. 243.54 billion) to Rs. 5,741.24 billion, slower than the 6 per cent growth recorded in the previous year.
On y-o-y basis, credit to the private sector from BFIs increased by 6.7 per cent in mid-March 2026. The shares of private sector credit from the BFIs to non-financial corporations and households, in mid-March 2026, stood at 62.7 percent and 37.3 per cent respectively. Such shares were 63.2 per cent and 36.8 per cent respectively a year ago.
In the review period, private sector credit from commercial banks, development banks and finance companies increased by 4.6 per cent, 3.5 per cent and 1.9 per cent, respectively.
Out of the total outstanding credit of the BFIs as of mid-March 2026, 15 percent is against the collateral of current assets (such as agricultural and non-agricultural products) and 63.8 per cent against land and building. Such ratios were 14.5 per cent and 65.2 per cent, respectively, a year ago.

In the review period, outstanding loan of the BFIs to consumable sector increased by 10.5 per cent, construction sector increased by 8.8 per cent, transportation, communication and public sector increased by 7.7 percent, industrial production sector increased by 5.6 per cent, and service industry sector increased by 1.8 percent.

However, credit to agriculture declined by 2 per cent, while finance, insurance, and fixed assets sectors contracted by 2.7 percent—raising concerns about underinvestment in productive and rural segments.
In the review period, trust receipt (import) loan extended by the BFIs increased by 23.2 percent, margin nature loan by 11.1 percent, hire purchase loan by 8.6 percent, demand and other working capital loan increased by 3.9 percent, real estate loan (including residential personal home loan) by 3.5 per cent, term loan by 3.2 per cent and cash credit loan by 1.6 percent.
However, overdraft loan decreased by 2.7 per cent during the review period.