Nepal Rastra Bank to Absorb Rs 20 Billion to Manage Excess Liquidity

Nepal Rastra Bank (NRB) is set to withdraw Rs 20 billion from the banking system on Sunday as part of its ongoing efforts to manage excess liquidity. The central bank will use its deposit collection instrument to absorb surplus funds currently circulating within the financial system.

According to NRB, the bidding process for the deposit collection will take place at 2:00 PM. Commercial banks as well as development and finance companies will be able to participate in the auction by submitting interest rate bids within the specified timeframe.

Banks and financial institutions willing to place deposits must bid a minimum of Rs 100 million, while the maximum bid can go up to the total amount announced by the central bank. Bids must be made in multiples of Rs 50 million, ensuring a standardized and competitive bidding process.

The deposit collection auction will be conducted on an interest rate basis, and NRB has allowed multiple bids at different interest rates. Only Class ‘A’, ‘B’, and ‘C’ banks and financial institutions will be eligible to participate in the process, the central bank said.

NRB stated that the instrument will have a maturity period of 84 days. Both principal and interest payments will be made on Falgun 27, according to the Nepali calendar. The central bank has been using such short-term instruments regularly in recent weeks to absorb surplus liquidity from the market.

Economists say the move is aimed at stabilizing short-term interest rates and preventing excess liquidity from putting downward pressure on lending rates or fueling speculative activities. By tightening liquidity conditions, NRB is seeking to maintain monetary stability and ensure effective transmission of its monetary policy.