Credit expansion to Nepal’s private sector rose by 7.3 percent during the first ten months of the current fiscal year 2024/25, while deposits at banks and financial institutions (BFIs) increased by 6.2 percent, according to the latest macroeconomic and financial report from Nepal Rastra Bank (NRB).
Between mid-July 2024 and mid-May 2025, BFIs collected deposits amounting to Rs 399.81 billion, while private sector credit expanded by Rs 368.68 billion. Despite the uptick, the growth in credit falls short of NRB’s annual target of 12.5 percent, as outlined in its monetary policy for the current fiscal year.
During the same period last fiscal year, deposit and credit growth stood at 7.8 percent and 4.7 percent, respectively, indicating a stronger credit performance this year, though still behind policy expectations.
In mid-May 2025, 63.1 percent of total private sector credit had been extended to non-financial corporations, while 36.9 percent went to households. These shares stood at 63.7 percent and 36.3 percent, respectively, a year ago.
Read: Remittance Inflows Surge 13.2% in First 10 Months of FY 2024/25: NRB
Credit growth by institutions showed commercial banks leading rising 7.6, followed by 6.5 percent growth from finance companies and 4.1 percent from development banks.
In terms of collateral, 65.1 percent of outstanding credit was secured against land and buildings as of mid-May, down from 68.5 percent a year earlier. Meanwhile, the share of credit backed by current assets like agricultural and industrial goods increased to 14.6 percent, up from 12.1 percent.
Sector-Wise Loan Growth
Loan disbursements grew across several key sectors. Credit to industrial production rose by 9 percent, construction by 12.3 percent, wholesale and retail by 4.9 percent, and transport, communication, and public by 11.9 percent. The service industry saw loan growth of 7.9 percent, while loans to the consumable sector increased by 8.8 percent.
Loan Type Trends
By loan category, trust receipt (import) loans saw the steepest rise, up 58.1 percent in the review period. Margin lending also jumped sharply by 39.3 percent. Term loans rose by 5.1 percent, hire purchase loans by 4.1 percent, cash credit by 3.4 percent, and real estate loans—including residential home loans—by 5.2 percent. However, overdraft loans declined by 12.9 percent.
Interest Rate Developments
The weighted average interest rate on 91-day treasury bills stood at 2.95 percent during the tenth month of the fiscal year, slightly down from 3.02 percent a year earlier. The weighted average interbank rate among BFIs rose to 3 percent from 2.88 percent over the same period.
Deposit rates continued to decline across all institutional categories. Commercial banks offered an average of 4.37 percent, development banks 5.11 percent, and finance companies 6.15 percent in the tenth month of the current fiscal year. These figures are down from 6.35 percent, 7.31 percent, and 8.55 percent, respectively, a year ago.
Lending rates followed a similar trend, with commercial banks averaging 8.11 percent, development banks 9.45 percent, and finance companies 10.31 percent. In the same month last year, these rates were 10.34 percent, 11.89 percent, and 13.11 percent, respectively.
Base rates also dropped year-on-year. Commercial banks reported a base rate of 6.17 percent, development banks 8.24 percent, and finance companies 9.11 percent—down from 8.34 percent, 10.15 percent, and 11.61 percent, respectively.
The moderation in interest rates, combined with steady credit expansion, indicates a cautiously improving credit environment amid NRB's ongoing monetary easing.
