Banking News– Nepal Rastra Bank has said that weak domestic demand has led to slower credit expansion, making it difficult to achieve the lending targets set under the current fiscal year’s monetary policy.

The central bank made the observation in its Annual Review Report of the Monetary Policy for Fiscal Year 2082/83 (2025/26), released on Tuesday.

According to the report, ample liquidity in the banking system has continued to push down the weighted average interest rates on both deposits and loans. The bank noted that the economy has been in a position to benefit from abundant liquidity and lower borrowing costs.

Although the non-performing loan (NPL) ratio has increased slightly, the central bank said the capital adequacy ratio and liquid asset levels have remained within regulatory requirements, helping to preserve overall financial stability.

The report also stated that, on a year-on-year basis, broad money supply had increased by 15.2 percent as of mid-May 2026 (end of Baisakh 2083), while credit extended by banks and financial institutions to the private sector grew by 6.7 percent.

Despite favorable liquidity conditions and declining interest rates, the central bank said subdued domestic demand has constrained credit expansion, making it challenging to meet the targeted growth in lending.