Festival season drives consumer and trade loan growth, banking credit surpasses Rs 60 trillion

Nepal’s banking sector credit has exceeded Rs 60 trillion in the first two months of the current fiscal year 2083/84, driven by a surge in consumer and wholesale and retail trade loans during the festival season. The total loan investment by banks and financial institutions reached Rs 60.17 trillion by mid-September 2026, according to data from Nepal Rastra Bank, the central bank.During this period, banking sector credit increased by Rs 62.84 billion, or 1.1 percent. This growth compares to a 0.6 percent increase (Rs 35.48 billion) in the same period of the previous fiscal year.Consumer loans accounted for the largest share of the total credit, reaching Rs 13.60 trillion, or 22.61 percent of all loans. This category saw a 0.2 percent increase (Rs 3.24 billion) in the first two months of the current fiscal year. Last year, consumer loans grew by 1.1 percent (Rs 12.15 billion) in the same period.Within consumer loans, credit against gold and silver as collateral showed the highest percentage increase, rising by 3.5 percent (Rs 4.42 billion) to Rs 132.34 billion by mid-September. Credit card loans also increased significantly, by 6.6 percent (Rs 53.44 million), to reach Rs 8.58 billion.Loans for personal vehicles, education, residential housing, and other personal uses totaled Rs 10.63 trillion, with an addition of Rs 45.17 million in the two-month period.The wholesale and retail trade sector represents the second-largest portion of loan investment, with Rs 10.45 trillion in credit by mid-September. This sector experienced a 2.5 percent increase (Rs 25.24 billion) in trade loans during the first two months of the fiscal year.Automobile dealer and franchise loans surged by 12 percent (Rs 11.55 billion), while import trade loans expanded by 6.8 percent (Rs 10.03 billion), according to Nepal Rastra Bank.Santosh Koirala, President of the Nepal Bankers’ Association and CEO of Machhapuchchhre Bank, attributed the increased demand for loans to heightened shopping and economic activities during major festivals like Dashain and Tihar. He noted that businesses take out loans for purchasing goods and expanding trade due to the high consumption of essential items during these periods.However, Koirala also mentioned that despite sustained demand for trade credit, the supply of goods has been affected by floods and landslides impacting border crossings with China.While overall credit expanded, loans to the agricultural sector decreased by 2.2 percent (Rs 9.21 billion) in the first two months, totaling Rs 401.22 billion by mid-September. This decline includes a 3.9 percent (Rs 3.13 billion) reduction in loans for crops and agricultural services.Conversely, the manufacturing sector saw an increase of Rs 18.07 billion, reaching Rs 948.41 billion. Food production alone experienced a 4.5 percent (Rs 8.97 billion) expansion in credit. The electricity sector’s loans grew by 1.9 percent (Rs 9.42 billion) to Rs 514.10 billion, and the construction sector saw a 3.7 percent (Rs 10.21 billion) increase, reaching Rs 284.53 billion.Him Lal Paudel, spokesperson for Agricultural Development Bank, stated that while there hasn’t been a significant overall improvement in loan demand, he anticipates gradual economic recovery with policy stability under a stable government. However, he cautioned that festival consumption alone would not bring substantial changes to the economy, emphasizing the need for investment in large infrastructure projects, new industries, and entrepreneurship to truly stimulate economic activity.As of mid-September 2026, the year-on-year consumer price inflation stood at 6.34 percent, with Madhesh Province experiencing the highest inflation at 7.48 percent. The total trade deficit increased by 26.0 percent to Rs 324.93 billion in the first two months of FY 2083/84.