16th October 2025, Kathmandu
The market update for October 15 reveals a fascinating convergence of central bank intervention, robust external sector performance, and critical regulatory changes in Nepal’s financial landscape.
Garima Capital Market Update
As investors and stakeholders navigate the current fiscal year, understanding these key highlights is essential for positioning capital strategically. The simultaneous management of liquidity and the surge in export earnings signal a nuanced but decidedly stabilizing economic environment, prompting a deeper look into the implications for banking stocks, corporate governance, and commodity trends.
Monetary Policy in Action
Nepal Rastra Bank (NRB), the central monetary authority, successfully withdrew Rs. 35 Arba in deposits from ‘A’, ‘B’, and ‘C’ class Banks and Financial Institutions (BFIs) over a four-day period using its online bidding system. This targeted intervention, utilizing instruments like the Deposit Collection Instrument (DCI), is a clear signal of the central bank’s commitment to fine-tuning market liquidity.
Implications for the Financial Sector
The absorption of Rs. 35 billion serves a dual purpose. Primarily, it aims to sterilize the excess liquidity that has accumulated in the banking system, largely due to the massive surge in remittance inflows. When banks hold too much surplus liquidity, it can lead to unnecessary downward pressure on short-term interest rates and potentially fuel speculative lending. By withdrawing these funds, the NRB maintains a balanced financial environment, keeping the weighted average interbank rate within its target corridor, which is crucial for overall price stability.
For BFIs, this move means a temporary tightening of available lendable funds. While the current environment still favors borrowers due to overall improved liquidity conditions, the NRB’s action prevents the deposit rates from falling sharply, thereby protecting savers. Investors should view this as a healthy liquidity management practice, suggesting that the central bank remains vigilant against the risk of rapid credit expansion while ensuring stable interest rate spreads for BFIs. This measured approach supports the long-term sustainability and stability of the financial sector.
Macroeconomic Triumph: A Surge in Exports and Low Inflation
The two-month Current Macroeconomic and Financial (CME) report presents a mixed but overwhelmingly positive picture of the nation’s external and domestic economic health.
The Phenomenon of the Export Boom
The most striking figure is the unprecedented 88.6% increase in exports, reaching NPR 47.32 billion year-over-year. This monumental growth indicates a strong momentum in the export sector, largely driven by sectors like agricultural products and hydropower-related goods being sold to external markets, particularly India. A strong export performance is vital for shrinking the persistent trade deficit.
While imports also rose by a substantial 16.2% to NPR 305.16 billion, the export growth rate significantly outpaced import expansion. This dynamic, coupled with a remarkable 33.1% surge in remittances to NPR 352.08 billion, underscores an incredibly strong external sector. The robust remittance inflows act as a powerful anchor, stabilizing the foreign exchange reserves and providing the necessary capital injection to support consumption and domestic economic activity.
The Low Inflation Puzzle
The annual consumer price inflation remained contained at a low 1.87%. This figure is comfortably below the NRB’s target threshold (which is typically around 6% for Nepal), signifying robust price stability. Experts attribute this stability to a combination of effective monetary policy management by the central bank, improved global supply chain conditions, and restrained domestic demand following recent economic adjustments. While low inflation is generally positive for consumer purchasing power and market stability, extremely low inflation must be watched to ensure it is not a symptom of sluggish economic activity or weak aggregate demand within the domestic economy. However, given the massive growth in remittances and exports, the current stability suggests a controlled rather than a stagnant environment.
New Regulatory Mandate: The CSR Guidelines (Second Amendment, 2082)
The new CSR Guidelines (Second Amendment, 2082) issued by the NRB mandate that ‘A’, ‘B’, and ‘C’ class BFIs must allocate 1% of their net profit to a dedicated Corporate Social Responsibility (CSR) Fund. Crucially, the directive specifies that at least 60% of this allocated amount must be utilized annually.
Impact on BFI Governance and Financials
This regulatory tightening moves CSR from a purely philanthropic option to a mandatory, measurable corporate obligation. For BFIs, this means greater clarity but also a more structured administrative burden to ensure compliance. The specified areas for spending—welfare, education, health, relief, and financial literacy—align BFI activities directly with national social development goals.
While the 1% allocation slightly impacts the final net profit available for distribution, the mandatory utilization of 60% ensures that the funds actively reach the community, enhancing the corporate image and social license to operate for banks. Investors should monitor how effectively BFIs operationalize this directive, as successful, transparent CSR execution often correlates with stronger governance and long-term stability, indirectly benefiting shareholder value through enhanced reputation and reduced regulatory risk.
Capital Market Activity and Commodity Trend Watch
Narayani Development Bank (NABBC) Shares
The announcement of an existing promoter selling 1,92,777 shares of Narayani Development Bank Limited (NABBC) to other promoter shareholders is noteworthy. In the capital market, a promoter selling a block of shares typically shifts ownership concentration among the internal stakeholders. This move is usually executed to facilitate consolidation of holdings among specific promoter groups or to meet liquidity needs without affecting the public shareholding ratio significantly. Given that the sale is strictly to promoter shareholders and not the public, the immediate market sentiment impact on the general share price is minimized, though it bears watching as it reflects internal developments within the bank.
This follows the recent extension of the 1:1 right share issue deadline, suggesting the bank is actively working to manage and restructure its capital base and ownership.
Gold Prices Reach New Highs
Finally, the continued escalation in domestic gold prices, with Fine Gold reaching NPR 248,900 per tola and Tejabi Gold at NPR 248,200 per tola, points to strong safe-haven demand and the global trend of rising bullion. This record-high pricing reflects persistent global geopolitical uncertainty and the perceived risk of other asset classes, making gold an attractive hedge for local investors. The rising price impacts consumer buying power and reflects the premium Nepal’s market places on this critical commodity.
The overall macroeconomic narrative for this period, low inflation anchored by massive remittance and export growth, coupled with the NRB’s prudent liquidity management, suggests a foundation for continued economic recovery and stability, even as regulatory and commodity markets introduce new variables to consider.
For More: Garima Capital Market Update