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Nepal’s banks are awash with lendable funds but businesses are reluctant  to borrow, leaving the economy sluggish and investment largely stalled. Nepal’s economic problem is no longer a shortage of money. It is a shortage of confidence.

Banks and financial institutions have Rs 1.363 trillion in excess liquidity including more than Rs 1 trillion available for lending, according to Nepal Rastra Bank. Lending rates have fallen to around 4–5 percent, yet credit demand remains weak.

More than Rs 400 billion has been parked with the central bank as banks struggle to deploy their funds. Nepal Rastra Bank is paying more than Rs 11.68 billion a year in interest on the deposits it absorbs.

The problem is not simply a lack of demand. Business leaders say collateral requirements,paperwork, weak turnover and uncertainty over government policy are making it difficult for businesses to obtain new credit.

“Banks themselves have reached a point where they are approaching industrialists and businesspeople and asking them to take loans,” said Bhim Ghimire, vice-president of the Confederation of Nepalese Industries. “But the private sector still has no clear answer to the question: ‘What kind of policy will come tomorrow if we invest today?’ That is why businesses are hesitant to make new investments.”

Businesses whose turnover has fallen also face tougher loan assessments because banks base lending capacity on current financial statements and documented income. At the same time, many entrepreneurs have capital tied up in real estate and existing debt, limiting their ability to provide collateral or take on additional loans.

Kamalesh Kumar Agrawal, president of the Nepal Chamber of Commerce, said the private sector was in a “wait-and-see” mode after suffering losses in real estate, stocks, cooperatives and productive industries following the Covid-19 pandemic.

“Investment will not pick up until the obstacles standing in its way are removed,” Agrawal said.

He called for investment-friendly laws, easier foreign-investment procedures, effective profit-repatriation mechanisms and functioning hedging facilities.

Ghimire said investors needed a longer-term policy guarantee.“The government should at least give investors confidence that this industrial policy and these laws will not be changed for 10 years,” he said.

Capital Spending Barely Moves

The government’s failure to inject money into the economy is compounding the problem. By October 2, the government had spent only Rs 12.25 billion, or 2.84 percent, of its Rs 431.10 billion capital budget.

By contrast, recurrent spending had reached Rs 205.38 billion, or 16.16 percent of the allocation, while financial management spending stood at Rs 74.85 billion, or 17.71 percent.

Business leaders say faster capital spending would increase cash flow, boost purchasing power and revive market demand.

“Consumption has declined, while development work has also slowed,” said Sur Krishna Vaidya, senior vice-president of the Federation of Nepalese Chambers of Commerce and Industry. “Large amounts of capital are trapped in real estate, preventing businesses from making new investments. Falling turnover has also made it difficult to obtain additional bank loans.”

Banks Face Rising Asset Pressure

The credit slowdown is also creating problems for banks.

Banks’ non-banking assets have reached Rs 56.80 billion, largely reflecting properties taken over after borrowers failed to repay loans. Falling property values and weak demand are making such assets harder to sell.

The combination of weak credit demand, loan-recovery problems and rising non-performing-loan risks is putting pressure on banks’ asset quality, profitability and capital.

The government is also struggling on the revenue side. By October 2, it had collected Rs 233.26billion, against total expenditure of Rs 292.48 billion, leaving a Rs 59.22 billion budget deficit.

The result is a striking economic paradox: banks have money to lend, but businesses lack the confidence, collateral, documented income or appetite to take it.

The use of induction cookers is rising in Nepali kitchens as households seek alternatives to cooking gas. Government policies promoting electricity consumption have further fueled market growth. But as demand increases, concerns over the quality of induction cookers are becoming more serious.

Imports of major household electrical appliances rose by Rs 863 million in the fiscal year 2025/26 as Nepali households increasingly turn to electric appliances, including induction cookers, as alternatives to cooking gas.

According to National Statistics Office data, imports of induction stoves, rice cookers, water heaters, coffee and tea makers, and other electric cooking appliances reached Rs 2.64 billion in 2025/26, up from Rs 1.78 billion a year earlier. The growing market, however, has raised concerns about the quality of low-cost and non-branded appliances entering the country.

Kathmandu resident Sarita KC bought an induction stove for Rs 4,000 after the seller promised a one-year warranty. The stove stopped heating within 15 days. “When I bought it, the shop said it had a guarantee. But after it broke down, the shop did not take responsibility and told me to contact the company’s service centre,” she said.

Binod Thapa had a similar experience. His induction stove repeatedly switched off while he was cooking. A technician later identified a problem with its circuit board and estimated the repair would cost more than Rs 1,000. “At that price, I thought it might be better to buy a new one,” Thapa said.

Consumer rights activist Jyoti Baniya said consumers can seek legal remedies when an appliance fails soon after purchase or causes losses because of poor quality. “An induction stove is not bought for six months. If a product purchased for long-term use breaks down within a few months, consumers can demand compensation,” Baniya said.

According to Baniya, consumers should preserve purchase bills and warranty or guarantee cards as evidence. Consumers can approach the Consumer Court and seek compensation if the damage is established.

Compared with the previous fiscal year, imports of coffee and tea makers increased by 68.4 percent, water-heating equipment by 54.4 percent, microwaves by 27 percent, and induction stoves by 37.8 percent. Rice cooker imports increased by 12.6 percent. Despite the growing market, questions remain over quality control and after-sales protection.

The Ministry of Industry, Commerce and Supplies is responsible for regulating products, but the ministry has yet to establish specific standards covering all induction stoves available in the market, according to officials and consumer advocates. Repeated attempts to contact ministry spokesperson Jitendra Basnet for comment were unsuccessful.

The Alternative Energy Promotion Centre, however, has specified technical requirements for single-pot induction stoves it distributes. The requirements include a minimum rated power of 2,000 watts, efficiency of at least 86 percent, a power factor of 0.9, overheating protection, pan detection, and timer and child-lock functions. The stove, operating at 230 volts and 50 hertz, must have IGBT (Insulated Gate Bipolar Transistor) overheat protection—the main semiconductor component that handles high-power conversion in devices.

Consumer rights advocate Jyoti Baniya says the gap between standards and the products available in the market raises questions about whether imported appliances are being adequately tested before reaching consumers.

Poor-quality appliances also create problems beyond financial losses. Short-lived electrical products increase electronic waste, while faulty wires, switches, chargers, and appliances can increase the risk of overheating, short circuits, and fires.

As demand for electric appliances grows, consumer advocates say stronger quality testing, clear warranty obligations, and effective after-sales services will be necessary to protect consumers from low-cost but unreliable products.