Nepali Banks Hold Trillions in Liquidity Yet Lending Capacity Stifled by Capital Rules and Bad Loans

Nepalese banks are facing a paradox: despite a high liquidity of NPR 12.69 trillion, their actual lending capacity is a mere NPR 4.37 trillion. This significant gap is primarily due to strict capital adequacy requirements that limit how much banks can lend relative to their own reserves. Compounding the challenge are ongoing issues with loan recovery, as banks struggle to get back money from previously issued loans. For the everyday investor, this means a potential slowdown in economic growth, as businesses find it harder to secure financing for expansion. This credit crunch could impact market sentiment and investment opportunities across various sectors, including the stock market.

• Despite NPR 12.69 trillion in banking system liquidity, only NPR 4.37 trillion is available for lending due to capital adequacy limits and poor loan recovery.