Nepal Rastra Bank to Withdraw NPR 40 Billion in Deposits to Manage Excess Liquidity

Kathmandu. Nepal Rastra Bank (NRB) is set to withdraw NPR 40 billion in deposits on Sunday. Due to the persistent excess liquidity, the central bank is once again withdrawing deposits through the deposit collection instrument auction for a period of 21 days.

The total deposits have currently exceeded NPR 77 trillion. The central bank has been withdrawing liquidity through the deposit collection instrument and the Standing Deposit Facility (SDF) to manage excess liquidity and interest rates in the financial system. Only 'A', 'B', and 'C' class banks and financial institutions licensed by the central bank will be eligible to participate in the auction.

When allocating the amount collected through long-term deposits, the allocation will be made sequentially up to the called amount, prioritizing the amounts bid at the lowest interest rates by the counterparties. Bidding for the deposit collection is being conducted through the online purchasing system, and the interest rate will be determined through bidding. The NRB has informed that the principal and interest of the deposit collection instrument to be auctioned on Sunday will be paid on Baisakh 6, 2083 BS.

The minimum amount that can be bid is NPR 100 million, and the maximum amount will be up to the total called amount, divisible by NPR 50 million.

Specifically, according to the NRB's Open Market Operations Procedure, if a long-term excess liquidity situation is observed in the financial market, the Open Market Operations Management Committee can use the long-term deposit collection instrument with a maximum maturity of 6 months under structural open market operations on any day as necessary to manage it and stabilize market interest rates. The central bank has been repeatedly using the deposit collection instrument based on this provision.