Nepal’s banks end Asar on a stronger footing: deposits top NPR 7.3T, lending nears NPR 5.6T, rates ease

KATHMANDU: Nepal’s banking system closed the month of Asar with a firmer liquidity position, softer average interest rates, and broadening access to formal finance, according to the Nepal Rastra Bank’s latest Banking & Financial Statistics (Monthly). Total deposits stood at about NPR 7.304 trillion, while total credit reached NPR 5.594 trillion as of mid-July 2025.

The big picture: bigger balance sheets, steady liquidity

Across commercial banks, development banks and finance companies, the system’s total assets reached NPR 9.10 trillion, underscoring a continued expansion of bank balance sheets into the new fiscal year.

On liquidity, the ratios tell a reassuring story. Banks’ credit-to-deposit (C/D) ratio stood at 76.59%, while the stricter CD ratio (which also considers debentures and other items) came in slightly lower at 75.79%. In simple terms: for every rupee entrusted by depositors, banks have lent out roughly 76 paisa, leaving a comfortable liquidity cushion to meet withdrawals and fund new loans.

Supporting that cushion, total liquid assets equaled 24.92% of deposits, with cash & bank balances at 8.00% and investments in government securities at 16.05% of deposits—evidence that banks are holding ample high-quality liquid assets should conditions tighten.

Interest rates: gently lower on average

Households and businesses continued to benefit from easing average rates. The weighted-average deposit rate was 4.19% in Asar, broken down as 3.37% on savings, 5.79% on fixed deposits, and 1.05% on call deposits. On the lending side, the weighted-average credit rate was 7.85%. For everyday readers: the “weighted-average” figure blends what banks actually pay/charge across different products, giving a more realistic snapshot than a single posted rate.

Deposit preferences also remain clear. Fixed deposits account for 48.02% of total deposits system-wide (with savings deposits at 36.60% and current deposits at 7.23%). That mix has two takeaways: depositors still like locking money away for better returns, and banks enjoy more stable, longer-tenor funding as a result.

Asset quality: watchful, but provisions are higher than NPLs

System-wide non-performing loans (NPLs) were 4.62% of total loans in Asar. Importantly, loan-loss provisions (LLP) measured 5.09% of total loans—meaning the sector has set aside more buffers than the current stock of bad loans. Banks also met deprived-sector lending requirements, with such loans at 5.52% of total credit. For borrowers and depositors, this mix signals a sector that is cautious but resilient.

Access to finance: more branches, cards, and mobile banking

Financial access continues to widen. Nepal now counts 6,522 bank and financial institution (BFI) branches (A, B and C classes combined), serving 59.88 million deposit accounts and 1.96 million loan accounts. Digital rails are increasingly the norm: 27.74 million mobile-banking customers, 13.67 million debit cards, 2.22 million internet-banking users, and 5,263 ATMs nationwide. Even branchless options are growing, with 822 branchless banking centers and 277,680 customers using them.

Why it matters: easier access means more people can save safely, receive remittances securely, and pay for goods and services without cash—trends that support daily life and small-business growth.

The growth arc through the year: deposits outpacing loans

A simple glance at the year’s trajectory shows deposits rising from NPR 6.447T in mid-August 2024 to NPR 7.304T in mid-July 2025, while credit climbed from NPR 5.173T to NPR 5.594T over the same period. The story here is steady loan growth and even faster deposit accumulation, which naturally cools risk and helps banks keep rates reasonable.

By the numbers, in context of the economy

Relative to the size of Nepal’s economy, total deposits equal 119.59% of GDP, and total credit equals 91.60% of GDP (ratios as presented in the central bank’s dashboard for Asar). These levels are typical of a bank-credit-driven economy where deposits remain the fundamental fuel for growth.

How the pieces fit together for you

If you’re a saver: The average deposit rate is around 4.19%, with fixed deposits offering more (average 5.79%). The strong share of fixed deposits suggests many savers are comfortable locking in for better yields.

If you’re a borrower: With the average lending rate at 7.85%, borrowing costs remain moderate by recent-year standards. Liquidity buffers and government-securities holdings imply banks have room to lend prudently.

If you use digital banking: You’re in good company—tens of millions already do. Expect banks to keep improving mobile and card services, given the user base and infrastructure already in place.

Microfinance pulse: wide reach, mixed stress signals

Beyond the commercial banking core, microfinance institutions (MFIs) continue to serve millions who need small, short-term credit and a formal place to save. In Asar:

Borrowers: 2.71 million

Saving members: 6.18 million

Total savings: NPR 199.76 billion

Overdue borrowers: ~625,000

The data show MFIs’ footprint remains extensive, though the elevated level of overdue borrowers underscores pressure on low-income households and small businesses; prudent risk management and borrower support will remain crucial.

A note on NIFRA (Infrastructure Development Bank)

Nepal’s dedicated infrastructure lender shows a compact but focused balance sheet. As of Asar end, deposits were NPR 7.69 billion, loans & advances NPR 25.14 billion, and investments in government securities NPR 10.99 billion. For the period, net profit stood at NPR 1.15 billion, with interest income at NPR 2.47 billion and interest expense at NPR 569 million—figures consistent with an institution geared to long-tenor projects and bond-market funding.

What to watch next

Credit momentum vs. liquidity: With deposits growing faster than loans across much of the year, banks hold comfortable liquidity. The next question is whether investment and consumer confidence push loan demand higher in the coming months—without compromising asset quality.

Rates and deposit mix: If liquidity remains ample, average lending rates could stay benign. But if fixed-deposit competition heats up, banks may adjust pricing, influencing both savings returns and lending costs.

Asset quality: NPLs at 4.62% and LLP at 5.09% are manageable, but they’ll need close monitoring if credit growth accelerates or if sensitive sectors face shocks.

Financial inclusion: With 6,522 branches, 27.74 million mobile users, and 13.67 million debit cards, the rails are laid. The focus now shifts to service quality, consumer protection, and digital literacy so more households can safely tap the system’s benefits.