Amid excess liquidity in the banking system and declining interbank interest rates, Nepal Rastra Bank is set to withdraw NPR 50 arba from the market through a 42-day deposit collection instrument.
Liquidity Withdrawal by Nepal Rastra Bank
Nepal Rastra Bank (NRB) has announced it will withdraw NPR 50 arba from the market on Sunday through a short-term monetary operation, citing excessive liquidity in the banking sector and a drop in interbank interest rates below 3 percent.
Deposit Collection Instrument for 42 Days
The central bank will use a 42-day deposit collection instrument to absorb the surplus funds from the banking system. This measure aims to stabilize short-term interest rates and manage liquidity conditions more effectively.
Reason for Excess Liquidity
While deposits have continued to increase, the demand for loans has remained sluggish. As a result, banks and financial institutions are holding excess liquidity, prompting NRB to step in with its monetary tools.
Auction Participation Details
NRB has called for participation in the online auction process by 3:00 PM today. Eligible participants include banks and financial institutions under:
- Class ‘A’ (Commercial Banks)
- Class ‘B’ (Development Banks)
- Class ‘C’ (Finance Companies)
The deposit collection instrument offered by NRB can also be used as collateral in interbank transactions.
This article was originally published on https://bajarkochirfar.com. Translated with the help of AI and reviewed by our editorial team.
