Banking News– Nepal Rastra Bank has concluded that unseasonal floods and the Gen-Z movement on Bhadra 23 and 24 weakened private sector confidence and dampened aggregate demand during the implementation of the monetary policy for the current fiscal year.

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

According to the report, the Gen-Z movement adversely affected business sentiment, limiting business expansion and creating downward pressure on aggregate demand. The central bank identified the movement as one of the major domestic challenges faced during the implementation of this year’s monetary policy.

The report stated that Nepal’s economy encountered a range of domestic and international challenges throughout the fiscal year.

On the global front, the central bank cited uncertainty arising from geopolitical tensions, including the impact of trade tariffs, damage to petroleum infrastructure caused by the conflict involving Israel, the United States, and Iran, disruptions to global supply chains due to the closure of the Strait of Hormuz, and rising fuel prices that contributed to global inflationary pressures.

Domestically, the report said the delayed onset of the monsoon and excessive rainfall in the month of Ashoj reduced agricultural production. It also stated that the Gen-Z movement placed additional pressure on aggregate demand.

The central bank further identified weak foreign trade, sluggish public and private construction activities, uncertainties surrounding land parcel subdivision and power purchase agreements, and subdued credit demand as factors that prevented the financial system from achieving the expected level of credit expansion.

According to the report, slower-than-expected economic activity, combined with deterioration in the quality of loans issued in previous years, has led to an increase in the non-performing loan (NPL) ratio, reducing banks’ lending capacity.

The report also noted that while remittance inflows continued to add liquidity to the financial system, the lack of corresponding growth in lending and investment resulted in persistent excess liquidity, posing challenges for monetary management.