Himal Press 
KATHMANDU: Private-sector credit growth slowed in the first quarter of the fiscal year 2025/26 despite falling interest rates, reflecting subdued economic activity and weakened investor confidence.
According to the latest data from Nepal Rastra Bank (NRB), lending to the private sector by banks and financial institutions (BFIs) expanded by only 1.5%, or Rs 82.93 billion, in the first three months of the current fiscal year. This marks a sharp decline from the 2.5% growth recorded during the same period of the previous year.
As of mid-October, total outstanding credit in the banking system stood at Rs 5,580.64 billion.
The average lending rates of commercial banks have fallen to 7.50% from 9.33% in the same quarter of the previous fiscal year. Similarly, lending rates of development banks and finance companies have fallen to 8.77% and 10.18% from 10.63% and 11.86%, respectively.
Outstanding loans to the construction (2.9%), transportation, communication and public sector (2.4%), industrial production (2.4%), consumable sector (1.6%), and wholesale and retail (1.4%) sectors grew in the review period. In contrast, loan expansion to the services sector contracted, signaling reduced activity in hotels, restaurants, tourism, and other service-related enterprises.
Commercial banks and finance companies each reported 1.6% credit growth in Q1, while development banks posted an even lower growth rate of 0.5%.
In contrast, deposits in the banking system have expanded by 3% in the review quarter. The total outstanding deposits have reached Rs 7,482.59 billion, according to the NRB report.
