Commercial Bank Reserves with NRB Drop by 14.2% Amid Tight Liquidity Conditions – Central Bank Data

According to the latest data from the Nepal Rastra Bank (NRB) Mid-Month survey, commercial banks’ reserves held with NRB declined by 14.2% year-on-year, indicating tighter liquidity conditions in the banking system.

This drop in bank deposits at the central bank reflects NRB’s deliberate move to absorb excess liquidity, as foreign assets surged and surplus funds moved into the system. With bank deposits at NRB falling, commercial banks have less idle cash parked at the central bank, which tends to push them to deploy funds via lending or inter-bank operations — or to hold higher liquidity buffers elsewhere. This shift corresponds with NRB’s broader stance of controlling monetary expansion and keeping inflation and currency pressures in check.

The decline in NRB-held bank reserves comes amid other signals of tight liquidity: while savings deposits and broad money metrics show growth, the banking sector’s fixed deposits and call deposits show limited or even negative movements, and credit growth remains modest. Collectively, these data points illustrate that NRB is managing liquidity by reducing banks’ idle balances at the central bank, encouraging more efficient use of funds rather than letting them lie dormant.