Credit growth lags as deposits surge 10.3% in 11 months

KATHMANDU: Private sector credit expansion by banks and fiscal institutions remained subdued over the first 11 months of the current fiscal year, while deposits expanded by a healthy 10.3%, the latest Current Macroeconomic and Financial Situation Report released by the Nepal Rastra Bank (NRB) shows.

Lending
Private sector credit extended by BFIs increased by 6.2%, or Rs 340.57 billion, reaching Rs 5,838.27 billion during the first 11 months of the fiscal year. In the corresponding period of 2024/25, private sector lending had grown by 8%, or Rs 407.62 billion.

On a year-on-year basis, private sector credit expanded by 6.5 percent as of mid-June.

The central bank has set the private sector credit expansion target at 12% for the current fiscal year.

Commercial banks recorded the strongest lending growth among BFIs, with private sector credit rising by 6.3% during the review period. Lending by development banks increased by 5.6%, while finance companies posted a 3.9% lending growth.

Non-financial corporations continued to account for the largest share of bank credit, absorbing 62.6% of total private sector loans, while households accounted for the remaining 37.4%.

Construction emerged as the fastest-growing lending sector, with outstanding loans to the sector rising by 15.1% during the review period.

Credit to the consumable sector increased by 13%, followed by transportation, communication and public sector lending (12.5%), industrial production (6.8%), service sector (4%). Loans to the finance, insurance and fixed assets sector posted marginal growth of 0.6%.

By loan category, trust receipt (import) loans recorded the highest growth of 36.7% during the review period. Margin lending was next with a 15.8% growth, followed by hire purchase loans (10.3%), real estate and residential home loans (6.3%), demand and other working capital loans (5.8%), and term loans (4.3%).

According to the central bank, loans secured against land and buildings as collateral for bank lending accounted for 63.6% of total outstanding loans, down from 65% a year earlier. Loans secured against current assets, including agricultural and non-agricultural products, accounted for 14.7%.

Deposits
Total deposits at BFIs increased by Rs 748.62 billion to Rs 8,012.49 billion during the review period, compared to an 8% increase, or Rs 517.60 billion, in the corresponding period of the previous fiscal year.

On a year-on-year basis, deposits expanded by 15% as of mid-June 2026.

The composition of deposits has also changed significantly. Savings deposits accounted for 46.6% of total deposits, up sharply from 36.2% a year earlier, while the share of fixed deposits declined to 37.3% from 50.2%.

Meanwhile, institutional deposits made up 33.7% of total deposits, down from 35.5% in the same period last year.