Nepal Rastra Bank Issues NPR 20 Billion One-Year Bond, Focusing on Liquidity Management

After previously relying on deposit collection instruments and reverse repo operations to manage market liquidity, the Nepal Rastra Bank has recently shifted its focus toward issuing bonds. In the current fiscal year, the central bank first issued a one-year bond, “Nepal Rastra Bank Bond 2083 Ka,” worth NPR 25 billion on 14 Poush 2082. Continuing this approach, it issued another NPR 25 billion bond on Monday, followed by a further issuance of NPR 20 billion on Tuesday in the form of the one-year “Nepal Rastra Bank Bond 2083 Ja.” Applications for the bond can be submitted online, but participation is limited to licensed Class A, B, and C banks and financial institutions. Interested institutions may apply for a minimum of NPR 50 million, and in multiples thereof, up to the total amount offered. The central bank has warned that if sufficient funds are not maintained in the counterparty’s account on the issuance date, the approved bid will be canceled, a penalty of 2.5 percent will be imposed, and the institution will be barred for six months from participating in open market operations and interest rate corridor auctions. Although the central bank first issued its bond in 1996, the renewed emphasis on bonds indicates a stronger reliance on this instrument for liquidity management in recent times.