Why Depositors Should Watch Liquidity Ratios Closely

For depositors, the safety of their money in banks depends heavily on liquidity ratios, which measure a bank’s ability to meet short-term obligations without stress. In Nepal’s banking sector, the Net Liquidity Ratio and the Statutory Liquidity Ratio (SLR) are the most crucial metrics. These ratios essentially tell depositors how much liquid cash and easily sellable assets (like government securities) a bank is holding compared to its liabilities. When these numbers are strong, depositors can feel confident that their funds are safe and accessible.

For example, as of Asadh 2082 (Mid-July 2025), Standard Chartered Bank Nepal reported the highest net liquidity at 46.33%, well above the industry average of 35.07%. This signals that the bank has a strong cushion of liquid assets, making it highly reliable for depositors who may need quick withdrawals. On the other hand, banks like NIC Asia and Prabhu, with lower liquidity levels (around 27–30%), are more aggressive in lending. While this boosts their profitability, it leaves thinner buffers, which depositors should interpret as higher risk during times of financial stress.

Similarly, the SLR ratio—which reflects the proportion of deposits invested in safe government securities—is another key safety signal. Banks like Nepal Bank and RBB maintain SLRs above 35%, showing a conservative and secure approach. For depositors, this means their funds are indirectly backed by government assets, adding an extra layer of safety.

Liquidity ratios also connect directly to confidence during crises. If too many depositors withdraw funds at once (a bank run), only those banks with strong liquidity buffers can manage without external support. For this reason, depositors should not only look at interest rates offered on deposits but also check liquidity strength. High deposit rates from a bank with weak liquidity could be a warning sign, not an opportunity.