Private sector credit remains poor

Kathmandu, Oct. 14

Private sector credit from the Banks and Financial Institutions (BFIs) couldn't improve in the first two months of the current Fiscal Year 2025/26 as it witnessed an increment of just 0.9 per cent.

Credit to the private sector went up by Rs. 49.24 billion and reached Rs. 5,546.94 billion in mid-September, aaccording to the Current Macroeconomic and Financial Situation report based on the statistics of two months of this year (mid-July to mid-September) published by the Nepal Rastra Bank (NRB) on Tuesday. However, on a year-on-year basis, credit to the private sector increased by 7.8 per cent.

In mid-August, such credit was decreased by Rs. 2.93 billion.

"Private sector credit from commercial banks and finance companies increased by 1.0 per cent and 0.8 per cent, respectively, while credit from development banks decreased by 0.1 per cent^," said the NRB.

Out of the total outstanding credit, 15.1 per cent is against the collateral of current assets, and 64.3 per cent is against land and building. While the outstanding loans to sectors like construction, manufacturing, consumable sector, transportation and communication increased, trust receipt (import) loan, margin nature loan, cash credit loan, term loan, real estate loan (including residential personal home loan), and hire purchase loan all increased, but overdraft loan decreased by 3.6 per cent.

 

Inflation remains below 2%

Inflation rate remained below 2 per cent in mid-September 2025. The central bank said that the y-o-y consumer price inflation stood at 1.87 per cent in mid-September 2025, which is a decrease compared to 3.86 per cent a year ago.

In mid-August, consumer price inflation stood at 1.68 per cent in mid-August 2025.

Food and beverage inflation decreased by 1.34 per cent, whereas non-food and service inflation stood at 3.70 per cent in the review month. In the same period in the previous year, the price indices of these groups had increased by 5.06 per cent and 3.19 per cent, respectively.

Ghee and oil prices witnessed the highest increase with 11.09 per cent while price of vegetables and spices went down by 12.74 per cent and 6.31 per cent, respectively.

Similarly, in non-food category, education, clothes and footwear, tobacco products and furnishing and household equipment saw inflation of 11.77 per cent, 7.67 per cent, 6.29 per cent, 4.84 per cent and 4.55 per cent, respectively.

The y-o-y consumer price inflation in Nepal remained at 1.87 per cent in mid-September 2025, while in India, it stood at 1.54 per cent in September 2025.

 

Remittances up by 33.1 per cent

Remittance inflows increased by 33.1 per cent to Rs. 352.08 billion in the first two months of this year, compared to an increase of 15.8 per cent in the same period of the previous year. During mid-August to mid-September, remittance inflows stood at Rs. 174.67 billion.

The number of Nepali workers taking first-time approval for foreign employment was 90,198, and those taking approval for renew entry was 45,884. In the same period of the previous year, these numbers were 76,485 and 40,583, respectively.

 

Forex reserves for 19.7 months' import

According to the NRB, gross foreign exchange reserves increased by 7.6 percent to Rs. 2881.35 billion in mid-September 2025 from Rs. 2677.68 billion in previous year. Reserves held by NRB increased by 6.9 per cent to Rs. 2582.38 billion, and reserves held by banks and financial institutions increased by 13.7 per cent to Rs. 298.97 billion.

The foreign exchange reserves of the banking sector are sufficient to cover prospective merchandise imports for 19.7 months, and merchandise and services imports for 16 months.

  Published in The Rising Nepal daily on 15 October 2025.