Domestic Assets Drop Rs. 147 Billion as Liquidity Pressure Mounts

Nepal’s Net Domestic Assets (NDA) declined by Rs. 147 billion in August 2025, signaling growing liquidity pressure in the banking sector. According to the monetary survey, NDA dropped to Rs. 4.99 trillion, down from Rs. 5.18 trillion a month earlier.

The fall is largely driven by a sharp reduction in net claims on government (−Rs. 102 billion, −10%), as the government increased its deposits in Nepal Rastra Bank. Claims on other financial institutions also shrank by Rs. 18.7 billion, while private sector credit grew only marginally by Rs. 12.6 billion (0.2%).

Economists say the contraction in NDA highlights a mismatch between rising external reserves and tightening domestic liquidity. While foreign assets rose by Rs. 89 billion during the same period, banks are experiencing reduced capacity to lend internally due to higher deposits by the government and cautious credit demand.

The pressure on domestic assets indicates potential risks for growth and investment. If liquidity remains constrained, businesses may face difficulties in accessing credit, which could slow down economic recovery despite strong remittance inflows and rising foreign exchange reserves.