The NEPSE Journal
Market commentary, data deep-dives, and trading notes from the NEPSE Trading desk.
Cereal and pulse prices in Nepal have climbed by over 9–12% compared to three years ago, placing a direct burden on household budgets. Although vegetables and spices have become cheaper, the persistence of higher costs in core staples means families continue to struggle with rising food bills, highlighting structural food inflation risks.
Nepal’s inflation in July–August 2025 reveals a dual trend: food inflation has eased due to falling vegetable and spice prices, but the non-food sector, led by education, clothing, and services, continues to exert upward pressure. This means households are benefiting from cheaper vegetables in the short run but still face rising long-term costs in education, clothing, and essential services, keeping the overall cost of living elevated.
Vegetables offered relief with an 18% drop, but rising oil, milk, and fruit costs offset the benefit, keeping Nepal’s food inflation under pressure. The divergence highlights that while short-term seasonal factors can ease prices, underlying food costs remain elevated.
Nepal’s inflation in early FY 2025/26 shows that while food inflation has eased due to lower vegetable and spice prices, non-food inflation is steadily rising, particularly in education, clothing, and services. This indicates that the burden on consumers is gradually shifting from volatile food items to more structural service costs, keeping the overall inflation outlook firm.
The future of Nepali banking, as reflected in the NRB Asadh 2082 report, will be shaped by tighter capital buffers, cautious liquidity management, greater focus on productive sector lending, and stricter oversight on spreads and NPLs. Banks that adapt by diversifying portfolios, improving efficiency, and strengthening risk controls will emerge stronger, while others may face consolidation pressures.
NRB’s directives in 2025 reshaped commercial banks’ performance by tightening CD ratios, enforcing capital adequacy, mandating sectoral lending, and monitoring spreads. While this limited aggressive growth, it strengthened overall stability and directed resources towards agriculture, energy, and SMEs — aligning the sector with broader economic goals.
Monetary policy directly shapes Nepal’s banking indicators by influencing lending rates, liquidity, capital buffers, and NPLs. Tight policy strengthens liquidity but slows growth, while loose policy boosts credit and profitability but can fuel future risks. For investors, tracking NRB’s policy stance is as important as analyzing individual bank reports.
Nepali banks, with an average CAR of 12.78%, are better capitalized than many peers in Bangladesh and Sri Lanka but remain slightly behind India’s top-tier banks. NRB’s stringent capital rules have helped maintain resilience, making Nepali banks regionally competitive in terms of capital buffers. However, rising NPLs and liquidity pressures mean banks must remain cautious to avoid future erosion of these buffers.
Nepal’s commercial banks are walking a fine line between loan expansion and deposit growth. State-owned banks remain conservative with low CD ratios, prioritizing liquidity, while many private banks push lending aggressively to maximize earnings. The real challenge for the sector is maintaining this balance, as overextension could trigger liquidity stress and rising NPLs in the future.
