Who Owns Nepal's Domestic Government Debt? Holders Explained

Nepal's public debt has two halves: external debt owed to foreign creditors (multilateral lenders like the World Bank and Asian Development Bank, and bilateral lenders), and domestic debt raised inside the country by selling government securities in Nepali rupees. This page is about the domestic half — who actually buys and holds those securities. As of the month of Falgun 2082 (Mid-March 2026), total public debt stood at about Rs 2,878 billion (Rs 287,829 crore), of which domestic debt was roughly Rs 1,348 billion (Rs 134,811 crore), or 46.84% of the total, according to the Public Debt Management Office (PDMO).

The domestic debt is issued through five instruments: Treasury Bills (short-term, up to one year), Development Bonds (long-term), Citizen Savings Bonds, Foreign Employment Saving Bonds, and a special IMF Bond. Development Bonds now dominate at about 75.6% of domestic debt, with Treasury Bills at roughly 23%. Nepal Rastra Bank (NRB), the central bank, acts as the government's issuing and market agent, auctioning these securities on behalf of the Ministry of Finance and the PDMO.

The answer to 'who owns Nepal government debt' is blunt: commercial banks. Nepal Rastra Bank's and PDMO's 'Ownership Structure of Government Securities' tables show commercial banks holding about 73% of all outstanding domestic securities. Once the other bank-and-financial-institution (BFI) classes are added, licensed BFIs together hold the large majority of the government's rupee debt, leaving only a thin slice for the central bank, insurers, contractual savings funds and ordinary citizens.

The PDMO's monthly Government Debt Statistics publishes a table titled 'Ownership Structure of Government Securities' that assigns every rupee of outstanding domestic securities to a holder category. Out of about Rs 134,296 crore of securities allocated in the Falgun 2082 (Mid-March 2026) table, commercial banks alone held Rs 98,268 crore — a 73.17% share. The next largest single named category was development banks, and then insurance companies, but no other holder came close to the commercial banks.

This concentration is structural, not accidental. Nepal's commercial banks (the 'A-class' BFIs) are required to hold a Statutory Liquidity Ratio (SLR) in eligible assets, and government securities are the primary qualifying asset. When private-sector loan demand is weak, banks park surplus deposits in government bonds, which are risk-free, count toward the SLR, can be pledged for central-bank liquidity, and pay attractive yields. The result is that a handful of banks finance most of the state's rupee borrowing.

It is worth distinguishing the instruments. Individual citizens barely appear in Treasury Bills and Development Bonds — those are institutional markets — but they dominate the retail instruments. In the Citizen Savings Bond, the 'Public' (individuals) held about 86% and NRB about 14% as of Mid-March 2026; in the Foreign Employment Saving Bond, aimed at Nepali migrant workers, the public held roughly 99%. These retail bonds are tiny, however: together only around Rs 1,440 crore, or barely 1% of domestic debt.

Nepal licenses banks and financial institutions in four classes under the Banks and Financial Institutions Act, 2073 (2017): A-class commercial banks, B-class development banks, C-class finance companies and D-class microfinance financial institutions. All four appear as holders in the ownership tables, but their weights are wildly unequal. Commercial banks, being the largest deposit-takers, hold the vast bulk; development banks, finance companies and microfinance institutions hold progressively smaller amounts.

Adding the four BFI classes together — roughly 73.2% (commercial) + 6.5% (development) + 1.3% (finance) + 0.1% (microfinance) — shows that licensed BFIs collectively hold well over 80% of Nepal's domestic government securities. This is why Nepali media frequently report that 'banks hold around 80%' of domestic debt: the exact figure depends on whether only commercial banks or all BFI classes are counted, and on the reference month.

Because these are the same institutions that lend to households and businesses, every rupee they lock into government bonds is a rupee not available for private credit. In periods of slack loan demand this is a convenient outlet for idle deposits; in a recovery, heavy government borrowing can compete directly with the private sector for the same pool of bank money — the classic 'crowding-out' concern discussed below.

Nepal Rastra Bank appears in the ownership tables mainly as a secondary-market holder — around 0.8% of total securities in Mid-March 2026. The central bank buys and sells government paper as part of open-market operations and liquidity management rather than as a permanent investor, so its holdings fluctuate. When NRB conducts outright purchases to inject liquidity, its share rises; when it drains liquidity, the share falls. It is not a primary financier of the deficit in the way commercial banks are.

Contractual savings institutions are natural long-term buyers of government bonds because their liabilities are long-dated. These include life and non-life insurance companies (which held about 3.7% of securities in Mid-March 2026), the Employees Provident Fund (Karmachari Sanchaya Kosh, EPF), the Citizen Investment Trust (Nagarik Lagani Kosh, CIT), and the Social Security Fund (Samajik Suraksha Kosh). In the PDMO tables, several of these fall inside the 'Others' bucket alongside market makers and the Nepal Infrastructure Bank; the Development Bond footnote explicitly notes that 'Others' includes the Nepal Infrastructure Bank and the Social Security Fund.

Individual citizens hold government debt in two ways: directly, through the small retail Citizen Savings Bonds and Foreign Employment Saving Bonds; and indirectly, through their deposits in banks, their insurance policies, and their EPF/CIT/Social Security contributions, which are then invested in government securities. In practice the direct retail channel is marginal, so most households finance the government at one remove, via the institutions that hold their savings.

'Crowding out' is the idea that when the government borrows heavily from domestic banks, it absorbs loanable funds that would otherwise flow to private businesses and households, and can push up interest rates. In Nepal the mechanism is direct: banks face a finite deposit base, and every large government bond auction they subscribe to reduces the funds available for private lending. When deposits are tight, this competition can raise the cost of credit for the private sector.

The risk cuts both ways with the economic cycle. In recent years of subdued private-sector loan demand and excess liquidity, banks were eager buyers of government securities, so heavy government borrowing did not obviously squeeze private credit — indeed the bonds gave banks somewhere to earn a return. But if loan demand rebounds while the government keeps borrowing at scale, the same bank balance sheets cannot fund both, and private borrowers may be crowded out or face higher rates.

Analysts and the central bank have flagged a further concern: extreme concentration of government debt in commercial banks ties the health of public finances to the banking system and vice versa, amplifying systemic risk if fiscal stress rises. This is one reason policymakers encourage broader participation — by insurers, pension and provident funds, and retail investors — which would both diversify the holder base and deepen Nepal's still-shallow domestic bond market.

The authoritative sources are Nepal Rastra Bank's 'Ownership Structure of Government Securities' statistics and the Public Debt Management Office's monthly Government Debt Statistics and semi-annual Public Debt Bulletin. The PDMO, established in 2018 under the Ministry of Finance and operating under the Public Debt Management Act, 2079 (2022), is the government's dedicated debt-management agency; NRB acts as its front-office issuing agent for domestic securities. Both publish holder-by-holder tables, which is why Nepal's domestic debt ownership is unusually transparent.

A few caveats apply to any single snapshot. First, the figures change every month as securities are issued and redeemed, so the exact shares quoted here are for Falgun 2082 (Mid-March 2026) and will drift over time — always check the latest PDMO bulletin for current numbers. Second, category labels are not perfectly standardized: some tables merge insurance, provident funds and the Social Security Fund into 'Others', so the split among non-bank institutions is less precise than the headline bank share. Third, amounts are reported in NPR crore (1 crore = 10 million); this article converts selected figures to billions for readability.

Despite these caveats, the central finding is robust across sources and time: Nepal's domestic government debt is overwhelmingly financed by its own banks, with commercial banks the dominant single holder, the wider BFI system holding the large majority, and non-bank institutions and citizens holding only a modest remainder.