Deposit Growth Strong, Private Sector Credit Expansion Sluggish

Kathmandu: While deposits in banks and financial institutions have been rising significantly, credit expansion to the private sector remains relatively sluggish. By mid-March of the current fiscal year, deposits increased by 6.6% to reach NPR 7,745.88 billion, higher than the 4.3% growth recorded during the same period last year. On an annual basis, deposits grew by 15.1%. However, private sector credit expanded by only 4.4% to NPR 5,741.24 billion, compared to 6% growth in the previous year, indicating slower lending activity. This disparity suggests excess liquidity in the banking system alongside weak credit demand, reflecting subdued economic activity. Of the total credit, 62.7% was directed toward the non-financial institutional sector and 37.3% toward individuals and households. While lending increased in consumption, construction, transport, and industrial sectors, it declined in agriculture and finance/real estate sectors. Meanwhile, the deposit structure shows a rise in savings and demand deposits, with a decline in fixed deposits.