NRB Assets Top Rs 4 Trillion Amid Bank Liquidity Glut

Nepal Rastra Bank's total balance sheet expanded past Rs 4.04 trillion by mid-September, driven largely by swelling foreign exchange reserves even as domestic private sector borrowing remains stagnant and commercial banks struggle with surplus cash.

According to preliminary financial statements released by the central bank and reported by Aarthik News, NRB's total assets and liabilities rose by Rs 169.91 billion over the first two months of the current fiscal year to reach Rs 4.044 trillion at the end of Bhadra. Foreign currency assets accounted for nearly 96 percent of that total, standing at Rs 3.899 trillion. The central bank held Rs 2.743 trillion in foreign securities and roughly Rs 639.75 billion in fixed deposits at foreign banks. Meanwhile, currency in circulation shrank by Rs 7.62 billion to Rs 794 billion, while government deposits climbed to Rs 301.2 billion.

However, the expansion in central bank reserves contrasts sharply with sluggish private sector demand and mounting idle funds across commercial lenders. Annapurna Post reported that banks and financial institutions are sitting on roughly Rs 1.36 trillion in excess liquidity, with more than Rs 1 trillion in deployable funds. Even though lending rates have declined to around 4 to 5 percent, private businesses are reluctant to borrow, citing policy uncertainty, sluggish retail demand, and frozen capital in real estate.

In response to the domestic cash pile, the central bank has stepped in repeatedly to absorb surplus liquidity. Artha Sansar reported that NRB called for bids on October 2 to mop up Rs 18 billion through a 28-day deposit collection instrument. That move followed the absorption of over Rs 400 billion from the financial system by early October, on which the central bank pays a 2.75 percent interest rate, Annapurna Post noted.

While systemic liquidity remains bloated, the central bank is also managing distressed regional institutions. Onlinekhabar reported that the NRB-appointed management team at troubled Karnali Development Bank is advancing plans to offer founder shares to depositors, in line with suggestions from the Securities Board of Nepal. Vishnu Kumar Vishwakarma, coordinator of the management committee, said depositors wishing to acquire shares would have funds debited directly from their accounts. The team has already written down former founders' Rs 210 million stake to 1 percent, leaving bank capital at roughly Rs 40 million as it seeks external strategic investors to revive the Nepalgunj-based lender.