KATHMANDU, March 20: Bankers have expressed optimism about a potential rise in lending following the formation of a new government. They have expressed hope at a time when the country’s banking sector is grappling with excess liquidity amid an economic slowdown.
Data from the Nepal Bankers’ Association (NBA) show that loan disbursement slowed further last month due to the general election held on March 5. Commercial banks issued only Rs 15.73 billion in new loans between mid-February and mid-March, taking total lending to Rs 5.172 trillion from Rs 5.157 trillion.
NBA President Santosh Koirala said investors had adopted a wait-and-watch approach, hesitating to take fresh loans or invest in new ventures and business expansions.
Lending slows as banks focus on recovery of loans at fiscal yea...
“Many investors are now hopeful about political stability under the new government, which is likely to boost confidence in the coming days,” Koirala said at a programme in Kathmandu.
Meanwhile, deposit collection by commercial banks stood at Rs 50.07 billion during the same period—more than three times the volume of new lending. In the first eight months of the current fiscal year 2025/26, deposits increased by Rs 473.76 billion to reach Rs 7.004 trillion.
The widening gap between deposits and lending has pushed the credit-to-deposit (CD) ratio down to 73.73 percent, well below the regulatory ceiling of 90 percent set by the Nepal Rastra Bank (NRB). Bankers say this leaves room for lending to expand by 16.27 percent, equivalent to around Rs 1.139 trillion.
Former banker Bhuvan Dahal said political stability, rather than low interest rates alone, would be key to boosting investment.
“Lower interest rates do not necessarily guarantee increased investment. What matters more is a business environment that ensures better returns,” Dahal said.
In a recent move, the NRB has introduced greater flexibility in directed lending. Under the revised guidelines, commercial banks are now required to allocate at least 10 percent of their total loans to the agricultural sector by mid-January 2027, down from the previous 12 percent requirement.
The central bank has also expanded the list of priority sectors to include tourism, information technology and communication technology-based industries, as well as export-oriented industries that use domestic raw materials.
Koirala said the revised policies would encourage banks to introduce new loan products, supported by the central bank’s simplified regulations.
