By mid-March in the current fiscal year 2024/25, Nepali commercial banks maintained a credit-to-deposit (CD) ratio of 79.29 percent. Although Nepal Rastra Bank (NRB) has permitted banks to maintain this ratio up to 90 percent, internal challenges have prevented them from increasing loan investments.
As of mid-March, 20 commercial banks had collected Rs 6.37 trillion in deposits from the public through various accounts and had disbursed Rs 4.85 trillion in loans. While NRB has authorized an additional Rs 6.5 billion in lending, banks are currently unable to invest more due to difficulties in recovering previously issued loans.
The Nepal Bankers’ Association (NBA) reported that commercial banks have steadily increased both deposit collection and loan investment over the past 10 months. By mid-September, banks had collected Rs 5.79 trillion in deposits, which increased by Rs 248.47 billion to reach Rs 6.37 trillion by mid-March. However, deposit collection saw fluctuations in the early months. In Ashoj (mid-September to mid-October), deposits fell to Rs 5.92 trillion before recovering to Rs 5.93 trillion in Kartik (mid-October to mid-November) and maintaining that level in Mangsir (mid-November to mid-December). The upward trend continued as deposits rose to Rs 5.98 trillion in Poush (mid-December to mid-January) and further increased to Rs 5.99 trillion in Magh (mid-January to mid-February).
Similarly, loan investment also experienced fluctuations. In Bhadra (mid-August to mid-September), banks invested Rs 4.68 trillion in loans, which slightly dropped to Rs 4.679 trillion in Ashoj. However, loan issuance rebounded in Kartik, reaching Rs 4.721 trillion. The upward momentum continued in the following months, with loan investments reaching Rs 4.81 trillion in Poush, Rs 4.827 trillion in Magh, and further climbing to Rs 4.85 trillion in Falgun (mid-February to mid-March).
Despite this steady growth, banks are facing hurdles in expanding lending due to challenges in loan recovery. While NRB has provided room for additional loan investments, financial institutions remain cautious, balancing liquidity management with rising non-performing loans.
