Kathmandu, June 19: Nepal’s commercial banks have continued to collect deposits at a much faster pace than they are able to extend loans, highlighting weak credit demand and persistent economic sluggishness.
Data released by Nepal Rastra Bank (NRB) show that the country’s 20 commercial banks mobilised an additional Rs 723 billion in deposits between mid-July 2025 and mid-June 2026. During the same period, however, banks increased lending by only Rs 288 billion. This means that less than 40 per cent of newly collected deposits were converted into loans, leaving a large volume of funds idle within the banking system.
The widening gap between deposits and lending has significantly increased excess liquidity in banks. Financial institutions have been struggling to find creditworthy borrowers despite having ample resources available for lending. Bankers say weak business confidence, sluggish private sector investment and slow expansion of economic activities have reduced demand for loans.
The trend comes even as borrowing costs have fallen sharply over the past year. Interest rates on individual fixed deposits dropped to as low as 4.27 per cent, while banks’ average base rate declined to 5.20 per cent. Lower rates are generally expected to encourage businesses and individuals to borrow more, but the expected rise in credit demand has yet to materialise.
Economists say the situation reflects deeper structural challenges in the economy. Many businesses remain cautious about making new investments due to weak market demand, while households are also limiting spending amid economic uncertainty. As a result, banks have found it difficult to channel their growing deposits into productive sectors.
As of mid-June, total deposits held by commercial banks reached Rs 7.253 trillion. Total outstanding loans stood at Rs 6.531 trillion, indicating that banks continue to hold substantial unused lending capacity.
Among individual banks, Prabhu Bank was the only institution to report a decline in deposits, with collections falling by 1.08 per cent over the review period. The remaining 19 commercial banks recorded growth in their deposit base.
In terms of lending performance, Standard Chartered Bank Nepal posted the sharpest decline, with its loan portfolio shrinking by 19.79 per cent. NIC Asia Bank followed with an 11.66 per cent drop in lending, while Prabhu Bank’s lending decreased by 2.14 per cent.
The latest figures suggest that restoring private sector confidence and stimulating investment remain key challenges for policymakers seeking to revive economic activity and boost credit growth.
People’s News Monitoring Service
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