Rs 1.5 trillion in idle liquidity: Why Nepal’s banks cannot turn remittance wealth into growth
Summary
Nepal’s banks are sitting on more than Rs 1.5 trillion in excess liquidity as remittance inflows surge and credit demand remains weak. Despite record-low lending rates, businesses and households are borrowing less, leaving deposits idle and savings returns under pressure.
Key Points
- Excess liquidity in Nepal’s banking system has repeatedly exceeded Rs 1.5 trillion, driven largely by remittance inflows.
- Remittances reached Rs 1.45 trillion in the first eight months of the fiscal year, and are now projected to equal about 33 percent of GDP.
- Bank lending rates have fallen to historic lows, but weak business activity, low credit demand and political uncertainty have kept borrowing subdued.
- The surplus is lowering deposit returns and is hurting savers while doing little to support broader economic growth.
