Drowning in Cash, Starved of Credit: Nepal’s Policy Paradox

Nepal’s banks hold over NPR 1.1 trillion in excess liquidity—capital above every reserve, prudential, and statutory requirement. Private sector credit growth is 3.8 percent against a 12 percent target. The credit-to-deposit ratio is 74 percent and falling. The policy rate is at a historic low of 4.5 percent. Private investment has cratered from 25.5 to 15.7 percent of GDP. Government capital expenditure is at 63 percent of the budget. Over $10 billion in annual remittances enters, funds consumption, and exits via imports without generating a single productive asset. The banking system is drowning in money. The economy is starving for credit. These two facts have coexisted for years because of a structural failure that has persisted across every administration—and that this government is now in a position to fix.