Where Nepal's bank money goes: farms feed a third of Sudurpashchim, but get a tenth of its credit
Central bank studies for 2025/26 show Madhesh growing 1.31% and Karnali 2.94%, while in the far west lending flows to trade and consumption rather than to farming.
Farming generates a third of the economy of Sudurpashchim Province in Nepal's far west. It receives 9.56% of bank credit, and that share is shrinking. The mismatch is the sharpest finding in a set of provincial studies by Nepal Rastra Bank (NRB), the central bank, for 2025/26.
The studies also show how unevenly Nepal grows. Madhesh Province, the largest of the three economies covered, has the weakest estimated growth. Its output is put at Rs 863.33bn, or about $5.7bn at the central bank's rate of Rs 152.23 to the dollar. Growth is estimated at 1.31%, against a national projection of 3.85%.
A wide gap around the national number
Karnali grew an estimated 2.94% in 2025/26. It is the smallest of the seven provinces, with 4.20% of national output and a GDP of Rs 277.25bn (about $1.8bn). Services make up 58.41% of that, agriculture 31.52% and industry 10.07%.
The Karnali study cites a national projection of 3.89%, while the Madhesh study cites 3.85%. The difference is small, but it is a reminder that these are estimates, not final accounts.
Source: Nepal Rastra Bank provincial studies
Sudurpashchim has a GDP of about Rs 463.89bn (roughly $3.05bn), a 7.03% share of national output. Its economy grew 2.71% at basic prices, which exclude product taxes and subsidies, and 3.28% at market prices. Per capita income is $1,170, against a national average of $1,513.
For investors, national growth is no guide to demand in any single market. A business selling into Madhesh faces a very different year from one selling into the far west.
Madhesh: weak growth, rising deposits, falling credit
Agriculture, forestry and fisheries are the largest part of Madhesh's economy, at 34.97% of GDP. The farm picture in 2025/26 was mixed. Fruit area rose 33.99% and fruit output 4.99%. Production of food and other crops fell 5.69% and spice output fell 4.44%. Timber output rose 60.58% and firewood 78.62%.
The major industries in the study ran at an average 64.59% of capacity. Industrial lending rose only 0.68%, to Rs 128.97bn, from Rs 128.09bn a year earlier.
Deposits in Madhesh rose 17.32% to Rs 478.37bn by mid-July 2026, while credit fell 0.18% to Rs 494.95bn. Lending still exceeds deposits in the province.
Two other figures show how the province earns its living. Some 116,207 land and property transactions were registered, raising Rs 3.22bn for the government. And Madhesh accounted for 22.60% of all labour approvals for foreign employment issued in Nepal in 2025/26.
Karnali: deposits grow, but tourism and roads lag
Karnali's economy is small and short of basic infrastructure. Of its 4,392km of roads, only 6.81% are blacktopped. Irrigation reaches 41.90% of cultivated land. Selected industries ran at an average of 30.89% of capacity.
Tourism is the clearest weak spot. Foreign arrivals fell 27.68% to 22,163. The report attributes the drop mainly to reduced activity by non-governmental organisations and higher aviation fuel costs. Arrivals from India and China also fell.
Banks are nonetheless expanding. The province had 481 branches of banks and financial institutions by the end of Ashadh 2083 (mid-July 2026). Deposits rose 22.03% to Rs 111.15bn and credit rose 9.79% to Rs 66.85bn. Industrial lending grew 25.63% to Rs 5.07bn, with construction-related industries taking 35.99% of it.
Deposits well above loans suggest that part of local savings may finance activity elsewhere, though the sources do not say where the money goes.
Sudurpashchim: credit that favours trade
Does bank credit follow the economy it serves? In the far west, the numbers say it does not.
Agriculture, forestry and fisheries produce 33.65% of Sudurpashchim's GDP, well above the 24.03% national share. Services produce 52.66%, and industry only 13.69%. Yet services absorbed Rs 120.07bn of loans, or 73.48% of the total of Rs 163.41bn. Industry took 16.96% (Rs 27.71bn). Agriculture received 9.56% (Rs 15.62bn), and its lending shrank 2.13%.
- Services73.48%
- Industry16.96%
- Agriculture9.56%
Source: Nepal Rastra Bank Dhangadhi office
Inside services, the money clusters. Retail consumer loans make up 38.46% of services credit and wholesale and retail trade 37.83%. Education has 4.73%, tourism 3.15% and transport and communication 1.75%.
Lending to deprived sectors, the targeted category for marginalised groups, fell 6.03% to Rs 7.57bn. Deposits rose 18.56% to Rs 206.09bn, while credit rose only 3.82%.
Branch access is uneven too. The province has 844 branches, including 333 commercial bank branches and 454 microfinance outlets. Kailali district has 350 branches, while mountainous Bajura has 27.
One reading is that lenders favour the safest and fastest-turning business, trade and personal consumption. That may be rational for each bank, but it leaves farms and factories with thinner credit.
What to watch
If lending recovers in Madhesh, it will show whether weak growth reflected weak demand or cautious banks.
The second is whether NRB or the government acts on the pattern of credit in the far west. The sources report no new measures, so any move on farm lending or deprived-sector targets would be new.
The third is Karnali's tourism and road numbers. A 27.68% fall in arrivals in a province with few paved roads points to slow gains in a small economy.
Finally, the national figure itself. The 2025/26 provincial numbers are estimates, and two different national projections appear in them. Final figures will show how large the gaps between provinces really are.
How this story was made: researched and written by The Standard’s desk with AI assistance, from the published reporting and official data credited below, and checked against those sources. Our standards.
