Commercial banks in Nepal have extended loans amounting to less than half of the deposits they collected during the first 11 months of the current fiscal year, leading to a buildup of excess liquidity amid sluggish economic activity.
According to data from Nepal Rastra Bank (NRB), the country’s 20 commercial banks mobilized additional deposits worth Rs 723 billion between mid-July 2025 and mid-June 2026. However, they issued only Rs 288 billion in new loans during the same period, highlighting weak credit demand despite ample funds available in the banking system.
The slowdown in lending has persisted even as interest rates have fallen sharply. The maximum interest rate on individual fixed deposits dropped to 4.27 percent, while banks’ average base rate declined to 5.20 percent. Nevertheless, commercial banks have struggled to expand their loan portfolios due to subdued business activity and weak demand for credit.
By mid-June, total deposits held by commercial banks had reached Rs 7.253 trillion, whereas total outstanding loans stood at Rs 6.531 trillion.
Among the 20 commercial banks, Prabhu Bank was the only institution to record a decline in deposits, with deposits falling by 1.08 percent. The remaining 19 banks posted growth in deposit collections.
On the lending side, Standard Chartered Bank Nepal experienced the sharpest contraction, with its loan portfolio shrinking by 19.79 percent. NIC Asia Bank recorded the second-largest decline in lending, with a drop of 11.66 percent, followed by Prabhu Bank, whose loan disbursements decreased by 2.14 percent.
The figures reflect the broader challenges facing Nepal’s economy, where low investment appetite, weak domestic demand, and slow industrial activity have limited credit expansion despite abundant liquidity and declining borrowing costs. Excess liquidity in the banking sector has consequently continued to rise, underscoring the gap between deposit growth and loan demand.
