The Nepal Rastra Bank (NRB) is set to withdraw Rs 20 billion from the banking system on Sunday 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 start at 2:00 PM. Commercial banks as well as development banks and finance companies can participate 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 process.
The deposit collection auction will be conducted on an interest rate basis. NRB has allowed multiple bids at different interest rates. Only Class A, B, and C banks and financial institutions are eligible to participate.
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 regularly using such short-term instruments in recent weeks to absorb surplus liquidity from the market.
Economists say this move aims to stabilize short-term interest rates and prevent excess liquidity from lowering 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.
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