Nepal Rastra Bank to Absorb 125 Billion Rupees in Liquidity via Deposit Collection

Kathmandu. The Nepal Rastra Bank (NRB) is set to collect 125 billion rupees in deposits today. To reduce excess liquidity, the central bank is once again utilizing a deposit collection tool through a bidding process.

With economic activity remaining sluggish for an extended period and following recent social movements, credit flow from banks has failed to increase. Anticipating no immediate growth in lending, banks are discouraging fixed deposits by lowering interest rates.

Total deposits have now exceeded 7.8 trillion rupees. The central bank has been absorbing liquidity through deposit collection tools and standing deposit facilities to manage excess liquidity and interest rates in the financial system. 

Only 'A', 'B', and 'C' class banks and financial institutions licensed by the Rastra Bank are eligible to participate in the bidding. When allocating long-term deposit collection amounts, the central bank will prioritize bids with the lowest interest rates until the total target amount is reached. The bidding will be conducted via an online system, with interest rates determined through the auction. The principal and interest for this deposit collection tool will be repaid on 2083 Baishakh 2. The minimum bid amount is 100 million rupees, and bids must be in multiples of 50 million rupees up to the total amount called.

Under the central bank's open market operations procedures, if long-term excess liquidity is observed in the financial market, the Operations Committee is authorized to use long-term deposit collection tools with a maturity of up to six months to manage market interest rates. The central bank has been frequently utilizing this provision to manage liquidity.