NPR 12.66 Trillion Excess Liquidity in Banks, Yet Investment Lags: FNCCI President Anjan Shrestha Warns
15th October 2026, Kathmandu
FNCCI President Anjan Shrestha highlighted that despite NPR 12.66 trillion in excess liquidity in Nepalese banks, expanding remittances, and electricity production, private sector credit and employment generation remain sluggish. He called for policy stability, easier credit access for SMEs, and a fair investigation environment for businesses.
Nepal’s economy is currently facing a paradox: financial institutions are overflowing with cash, yet private sector investment and employment generation remain sluggish.
Addressing an interaction program titled “Current Economic Situation and Growth Prospects of the Private Sector” organized by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), FNCCI President Anjan Shrestha expressed deep concern over the nation’s inability to channel liquidity, strong remittance inflows, and growing hydroelectricity generation into productive investments and exports.
Nepal’s Macroeconomic Paradox in Numbers
Despite favorable financial indicators, overall credit expansion to the private sector has failed to reach targets set by Nepal Rastra Bank.
| Economic Indicator | Value / Percentage | Impact / Context |
| Excess Liquidity in Banks | ~NPR 12.66 Trillion | Capital remains unutilized in commercial bank reserves. |
| Annual Remittance Inflows | > NPR 2.3 Trillion | Capital primarily fuels consumption rather than domestic manufacturing. |
| Bank Deposit Growth (FY 2025/26) | 13.9% | Strong growth reflecting high saving rates and risk aversion. |
| Private Sector Credit Growth | 6.6% | Missed the central bank’s target of 12%. |
| Average Base Lending Rate | Drops to 6.55% | Low borrowing costs have failed to stimulate market demand. |
| Trade Balance | Imports: NPR 2.096T | Exports: NPR 315B | Severe trade deficit highlighting low domestic production capacity. |
Key Challenges Facing Nepal’s Private Sector
1. Weak Market Demand and Credit Misallocation
While average lending rates have dropped to 6.55%, credit expansion remains low—a clear indicator of subdued consumer demand. Furthermore, approximately 63% of total bank credit is tied up in real estate collateral. This leaves Small and Medium Enterprises (SMEs) without large physical property assets completely shut out from commercial loans.
2. Bottlenecks for SMEs
Small and Medium Enterprises serve as the backbone of Nepal’s local economy, fostering self-employment and female entrepreneurship. However, SMEs face severe operational challenges, including:
-
Lack of collateral-free financing options.
Advertisement
-
Delayed payments from government entities and corporate clients.
-
Rising operational costs amidst shrinking market demand.
Strategic Recommendations by FNCCI
FNCCI has outlined several key structural reforms to restore business confidence and accelerate economic growth:
Cash-Flow & Invoice Financing for SMEs: Transition from physical collateral-based lending to transaction-, cash-flow-, and invoice-based lending mechanisms.
Relief Loans for Disaster-Affected Businesses: Following severe damage to infrastructure, power plants, and transportation routes in the Rasuwa and Bhotekoshi regions, FNCCI urges the government to extend subsidized rehabilitation credit.
Industrial Clean Energy Utilization: Direct rising hydroelectric power generation toward manufacturing industries, cold storage networks, and electric vehicles to lower production costs and substitute imports.
Legal and Administrative Predictability: FNCCI supports anti-corruption campaigns but emphasizes that routine business failures or procedural errors must not be conflated with deliberate fraud. FNCCI urges law enforcement agencies to focus on evidence-based investigations rather than arbitrary detentions.
For more: NPR 12.66 Trillion Excess Liquidity
