On Friday, 2 October 2026, Nepal Rastra Bank announced it would absorb Rs 18 billion of excess liquidity from the banking sector through a deposit collection operation, according to market media ShareHub and ICT Frame. It was the third such operation in seventeen days. On 16 September, the central bank had moved to collect Rs 60 billion for 30 days; on 18 September, another Rs 30 billion for 28 days, through competitive bidding. Three sweeps in seventeen days.
A deposit collection operation is exactly what it sounds like. When banks are sitting on more cash than they can lend, NRB invites them to bid to park the excess with the central bank for a fixed term, paying interest that is set through the bidding itself. It is the mirror image of the liquidity injections central banks use in a crunch: the plumbing is identical, only the direction is reversed. This is not an emergency measure. It is routine liquidity management. But routine can still be revealing. A central bank does not keep vacuuming tens of billions out of the system unless the system keeps producing a surplus of money with nowhere to go.
The missing piece is borrowers. Nepal's banks have no shortage of deposits; they have a shortage of loan demand. A midterm assessment of the FY26 monetary policy by CareEdge Ratings, published earlier this year, put it plainly: the banking sector had excess liquidity, but demand for credit from the private sector remained subdued, with credit growth running at roughly 4.0 percent during the review period. The government's fiscal stimulus and NRB's policy easing, the assessment noted, had "not yet fully translated into widespread credit demand." That gap matters, because the monetary policy for the current fiscal year, announced by Governor Bishwo Nath Poudel in July 2026, targets 11 percent growth in private-sector lending, alongside 14 percent broad money growth and 5.5 percent inflation, as reported by Meroauto. An economy running at 4 percent credit growth has a long road to 11 percent.
None of the usual constraints explains this away. Inflation is not the problem: CareEdge's review recorded consumer price inflation at just 1.11 percent over four months, 1.63 percent over five months, and 3.25 percent over seven months, well below historical averages. Reserves are not the problem either: gross foreign exchange reserves rose 21.3 percent year on year to Rs 3,302.66 billion (USD 22.76 billion) by mid-February 2026, enough for roughly 18 months of imports. Money is cheap, the external buffer is the strongest in years, and policy rates have been cut. The classic developing-economy story is one of money being too expensive or too scarce. Nepal's story this year is the opposite: money is abundant and affordable, and the economy is declining to borrow it.
The mechanism deserves a moment of care, because it is easy to read moral judgment into it. Banks are not refusing to lend out of stubbornness. In a deposit collection operation, banks voluntarily bid to park funds; the interest rate that clears tells NRB how desperate banks are to offload cash. The fact that the operations keep recurring at tens of billions of rupees is the market's own verdict on how much idle money is sloshing around. Banks earn their keep on the spread between deposit and lending rates; cash parked at the central bank earns a thin return. If lenders had creditworthy borrowers at hand, they would not hand the money back to NRB. The bottleneck is on the demand side: businesses are not asking for working capital, home buyers are not asking for mortgages, and industries are not asking for expansion loans at the scale the system can fund.
The same week showed the money glut is not moving asset prices either. The NEPSE index closed at 2,587.25 on Friday, down 11.90 points on the day, and lost 42.55 points over the week, with double-digit declines in three of four trading sessions, Farsight Nepal reported. Trading turnover shrank to Rs 4.29 billion on Friday from Rs 4.89 billion on Thursday. This happened after the Ministry of Finance's 21-point action plan for stock market reform and a week of consultations by Parliament's Finance Committee. Market participants, the report noted, appeared to be waiting for concrete implementation rather than reacting to policy announcements. Cheap, abundant money has not, so far, been enough to turn the market's mood.
Two caveats before the picture hardens. First, deposit collection operations are reversible and short-dated, most of them 28 to 30 days. They manage a monthly surplus; they do not diagnose the economy by themselves. Second, credit numbers move in lumps: a single month's weak reading can be noisy, and lending typically picks up after the festival season and the winter development-spending cycle. History describes what happened. It does not dictate what comes next.
But the direction of the question has shifted, and that is what makes this worth watching. A year ago, the debate around Nepal's banks was about whether money was tight enough to slow inflation. Today the central bank's own target, 11 percent private-sector lending growth, looks ambitious precisely because liquidity has stopped being the constraint. Nepal's economy does not have a money problem. It has a borrowing problem, and until businesses start demanding credit, the central bank will keep sweeping the surplus off the floor.
This article is published for research and education purposes only. It is not investment advice, and nothing here should be read as a recommendation to buy, sell, or hold any security. Figures cited reflect publicly reported information at the time of writing and may be revised.