Deposits with Nepal Rastra Bank Jump 23%: Liquidity Management in Focus

Deposits held by financial institutions with the Nepal Rastra Bank (NRB) have increased sharply by 23 percent year-on-year, reaching Rs. 337.6 billion in mid-August 2025, according to the Other Depository Corporation Surveypublished by NRB. This significant growth highlights the central bank’s strengthened liquidity management role and signals improved cash positions within the banking system.

The rise in deposits with NRB reflects the combined effect of improved liquidity inflows, strong remittance earnings, and cautious lending by commercial banks amid moderate credit demand. As credit expansion slowed, banks opted to park excess funds with the central bank to earn risk-free returns through the Standing Deposit Facility (SDF) and other short-term liquidity tools.

Economists view this as a positive development, suggesting that the banking system currently enjoys adequate liquidity cushion compared to the crisis seen in 2022–23. The NRB’s monetary policy focus on maintaining stable interbank rates and managing excess liquidity appears to be paying off, helping ensure financial system stability while preventing inflationary pressures.

However, some analysts warn that the growing idle balances with the central bank may also indicate limited private sector credit growth, as banks are becoming increasingly risk-averse due to sluggish business activities and weak investment sentiment. This situation underscores the need for policy coordination between monetary and fiscal authorities to channel liquidity into productive sectors rather than letting it accumulate passively within NRB accounts.