KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.
Nepal’s latest economic indicators reveal an economy navigating cautious reform efforts amid ongoing financial and structural challenges. On the policy front, Nepal Rastra Bank’s planned investment of pension and employee funds into banks, along with its draft AI guidelines, signals an attempt to stabilise liquidity, modernise financial services and strengthen governance.
However, these measures come against a backdrop of weakening investor confidence, reflected in a falling NEPSE index and a sharp decline in bank and financial institution profits driven by sluggish credit demand, excess liquidity and lower lending rates.
At the macro level, rising public debt and growing external liabilities highlight fiscal pressures, while investor movement from gold to silver points to inflation concerns and changing risk perceptions. At the same time, progress in energy and fuel infrastructure, a rebound in tourism, improved agricultural production and the revival of stalled exports suggest underlying resilience in the real economy.
Overall, the outlook hinges on better coordination between regulators, faster project execution and policies that can convert stability measures into sustainable credit growth and broader economic momentum.
NRB to invest Rs 7.6 billion in banks and financial institutions from pension and employee funds
Nepal Rastra Bank plans to channel Rs 7.6 billion into banks and financial institutions using resources from its pension, gratuity and Employee Security Funds. Of this amount, Rs 6.60 billion from the pension and gratuity fund will be invested in ‘A’, ‘B’ and ‘C’ class banks and finance companies. An additional Rs 1 billion from the Employee Security Fund will also be allocated under similar criteria. Eligible institutions must meet standards related to capital adequacy, operating history and non-performing loan levels. Interested institutions are required to submit proposals quoting interest rates, with deadlines set for December 14 and February 15.
NEPSE drops 0.9% last week amid fragile investor sentiment
The Nepal Stock Exchange (NEPSE) slipped by 23.80 points, or 0.90 percent, over the past week as investor confidence stayed subdued. The index ended the week at 2,607.37 points, declining on four out of five trading days. Gains were limited to the manufacturing and processing and life insurance sub-indices, while finance and microfinance recorded the sharpest losses. Weekly turnover decreased by 2.43 percent to Rs 20.99 billion, and total market capitalisation fell to Rs 4.377 trillion, wiping out nearly Rs 40 billion in investor wealth. Ngadi Group Power led in trading volume, while Swastik Laghubitta posted the highest share price increase.
Nepal Rastra Bank drafts AI guidelines to modernise banking and financial services
Nepal Rastra Bank (NRB) has prepared draft guidelines to ensure the responsible, ethical and transparent use of artificial intelligence (AI) by banks and financial institutions. The proposed framework seeks to improve efficiency while protecting data privacy, reducing cyber risks and preventing discriminatory outcomes. It covers AI applications such as credit assessment, fraud detection, customer support, risk analysis and regulatory compliance. The central bank has asked institutions to categorise AI systems based on risk, establish strong governance mechanisms and hold senior management accountable for AI-driven decisions. Through this initiative, NRB aims to create a more competitive, inclusive and accessible financial system and has invited feedback from stakeholders by mid-January.
Net profits of banks and financial institutions fall 14.7% amid economic slowdown
Net earnings of Nepal’s banks and financial institutions (BFIs) dropped by 14.71 percent in the first four months of fiscal year 2025/26, reaching Rs 21.31 billion compared to Rs 24.99 billion in the same period last year, according to Nepal Rastra Bank (NRB). Commercial banks saw profits decline by 13.11 percent, although Rastriya Banijya Bank and a few others managed modest growth. The downturn is attributed to sluggish credit demand, falling lending rates and disruptions linked to the Gen-Z movement. The weighted average lending rate fell to 7.38 percent, while the base rate declined to 5.41 percent. High excess liquidity and a credit-to-deposit ratio of 74.12 percent indicate underused lending capacity, weighing on BFI profitability.
Nepal’s public debt rises to Rs 2.73 trillion in first four months of FY 2025/26
Nepal’s outstanding public debt climbed to Rs 2,729.41 billion by mid-November 2025, increasing by Rs 55.37 billion during the first four months of fiscal year 2025/26, according to the Public Debt Management Office. External borrowing accounted for Rs 47.63 billion of the rise, while domestic debt increased by Rs 7.74 billion, pushing external debt to 53.25 percent of the total. The debt-to-GDP ratio stands at 42.65 percent. During the review period, the government raised 23.29 percent of its annual borrowing target and spent Rs 150.88 billion on servicing existing debt.
Silver prices jump over 30% as investors seek alternatives to expensive gold
Soaring gold prices have driven Nepali investors toward silver, pushing its price up by more than 30 percent in a month. Data from FENEGOSIDA show silver prices rising by Rs 900 per tola, from Rs 3,015 on November 9 to Rs 3,905 on Friday. Traders cite strong domestic and international demand, particularly from electronics, solar power and electric vehicle industries, as key factors tightening supply. Silver is increasingly viewed as a more affordable investment option for smaller buyers. Meanwhile, gold prices climbed by Rs 4,200 last week, supported by global interest rate cuts, geopolitical uncertainty and growing central bank reserves.
Second phase of petroleum pipeline expansion moves forward with Indo-Nepal cooperation
Work on the second phase of Nepal’s petroleum pipeline expansion has advanced through joint investment by Nepal Oil Corporation (NOC) and Indian Oil Corporation (IOC). The project covers the Jhapa–Siligudi pipeline, the Siligudi–Charali pipeline with a storage depot, and the Amlekhgunj–Lothar line, combining technical and financial support from IOC. NOC will construct a storage facility in Chitwan, while IOC will build infrastructure on the Indian side. The pipelines, stretching 62 km from Amlekhgunj to Lothar and 50 km from Siligudi to Charali, are expected to cut annual fuel transport costs by Rs 5–6 billion. Pipeline installation is scheduled to begin within nine months.
Gandaki chief minister calls for faster progress on Budhigandaki hydropower project
Gandaki Province Chief Minister Surendra Raj Pandey has stressed the need to accelerate construction of the long-stalled Budhigandaki Hydropower Project. Speaking at the golden jubilee celebration of Jageshwar Secondary School in Gorkha, he noted that the project, spanning Gorkha and Dhading districts, would strengthen the hydropower sector and improve local livelihoods. To move the project forward, joint meetings involving Gandaki and Bagmati provincial governments and local stakeholders are being planned along the project corridor. Pandey emphasized that coordinated and positive efforts are essential to overcome bureaucratic hurdles and deliver tangible development outcomes.
India allows 100% foreign investment in insurance, with possible spillover effects for Nepal
India’s Union Cabinet has approved the Insurance Amendment Bill, 2025, raising the foreign direct investment cap in the insurance sector from 74 percent to 100 percent. The decision aims to attract long-term capital, encourage technology transfer and support India’s objective of universal insurance coverage by 2047. The amendment mandates that at least one senior executive be an Indian citizen and permits mergers between insurance and non-insurance firms. Analysts believe the reform could reshape insurance technology, reinsurance, risk management and digital services, potentially influencing Nepal’s insurance industry, where foreign participation remains limited and largely confined to joint ventures.
CIB action against Prabhu Bank fuels market unease and raises questions over NRB authority
The Central Investigation Bureau’s detention of Prabhu Bank’s chief executive and senior officials has generated significant anxiety in Nepal’s financial sector, sparking fears of a possible bank run. The investigation involves loans that had already been settled and cleared by Nepal Rastra Bank, exposing a jurisdictional clash between the central bank’s regulatory mandate and police investigative powers. Although Prabhu Bank’s financial position remains sound, the move has weakened depositor confidence by sidelining the regulator’s technical assessment. Experts warn that undermining NRB’s role in credit risk evaluation could discourage lending, heighten systemic risk and create prolonged uncertainty unless coordination between regulatory and investigative agencies improves.
Annapurna region records historic tourist arrivals in 2025, signalling strong trekking recovery
Tourism in the Annapurna Conservation Area (ACAP) reached a new high in 2025, with 273,646 foreign visitors recorded between January and November. The total included 115,555 tourists from SAARC countries and 158,091 from other regions. April emerged as the busiest month, followed by October and March. The figure exceeds last year’s total by more than 29,000 visitors, highlighting a robust post-pandemic rebound. ACAP officials attribute the growth to improved trekking routes, safety measures, sanitation, transport connectivity and digital promotion, and remain optimistic about even higher arrivals in 2026.
NEA recovers over Rs 2.5 million in one day during dues recovery drive in Banke
As part of its Outstanding Dues Recovery Campaign, the Nepal Electricity Authority’s Nepalgunj Distribution Centre collected more than Rs 2.5 million in unpaid electricity bills in a single day in Banke district. On Monday, arrears worth Rs 2.518 million were recovered from 82 consumers in Nepalgunj and Khajura after supply lines were disconnected for long-term defaulters. Since the campaign began on November 30, the Centre has collected over Rs 4.6 million from 188 consumers in four days and disconnected electricity to around 400 defaulters. NEA officials said the drive will continue rigorously until all outstanding dues are cleared.
Indigenous crop output in Humla increases by up to 20%
Production of indigenous crops in Humla district has risen sharply as farmers return to traditional agriculture, encouraged by greater awareness and better market returns. According to the Agriculture Development Office, output has grown by 15 to 20 percent compared to last year, reversing a recent downward trend. Support from the Food Management and Trading Company Limited and local governments has helped promote and market these crops, boosting farmers’ confidence. Barley, buckwheat, uwa, chino and kaguno remain the main traditional crops grown across the district. Officials note that long-term growth will depend on improved irrigation facilities and the adoption of modern farming practices.
Baskuna’s orange orchards bring in Rs 15 million in seasonal sales
Baskuna village in Beni Municipality–4 has turned vibrant with ripe orange orchards, delivering strong earnings for local farmers during the peak harvest season. After shifting away from traditional crops such as paddy and millet nearly 18 years ago, about 40 households now depend on commercial orange cultivation. Farmers estimate combined sales of around Rs 15 million this year from Baskuna and surrounding areas. Traders from major cities are purchasing orchards in advance, offering early payments. With market prices ranging between Rs 60 and Rs 85 per kilogram, Baskuna’s oranges continue to enjoy strong demand and reliable profits.
Methyl bromide fumigation begins, reviving stalled pine cone exports to India
Nepal has conducted methyl bromide fumigation for the first time at the Integrated Check Post in Nepalgunj, nearly five decades after the legal framework was established. The lack of fumigation facilities had previously blocked exports of herbs and pine cones to India, leaving nearly 2,000 tonnes stranded in storage for years. Following persistent lobbying by the Herbal Entrepreneurs Association of Nepal, fumigation has now started, with 40 tonnes processed initially. Authorities say exports have resumed, with close to 100 containers already cleared, although exporters continue to demand a reduction in the existing 100 percent export tax.
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