Nepal Rastra Bank to Withdraw Rs 50 Billion to Manage Excess Liquidity

The Nepal Rastra Bank is set to withdraw Rs 50 billion in deposits today, Sunday.

As excess liquidity continues to persist in the financial system, the central bank has once again decided to absorb liquidity through its deposit collection instrument. Currently, total deposits in the banking system have exceeded Rs 7,600 billion. To manage excess liquidity and regulate interest rates, the central bank has been using deposit collection instruments and the standing deposit facility.

Only ‘A’, ‘B’, and ‘C’ class banks and financial institutions licensed by Nepal Rastra Bank will be eligible to participate in today’s auction. While allocating long-term deposits, bids will be prioritized based on the lowest interest rates offered, and allocation will be made sequentially until the total announced amount is met.

The auction will be conducted through the online bidding system, and the interest rate will be determined through the bidding process itself, the central bank said. The principal and interest of the deposit collection instrument auctioned today will be payable on Chaitra 8, 2083 BS. The minimum bid amount has been set at Rs 100 million, while the maximum bid can be up to the total announced amount, provided it is divisible by Rs 50 million without remainder.

According to the central bank’s Open Market Operations Directive, if a long-term excess liquidity situation is observed in the financial market, the Operations Committee may use structural open market operations, including long-term deposit collection instruments of up to six months’ maturity, as required to manage liquidity and stabilize market interest rates. Based on this provision, Nepal Rastra Bank has been repeatedly using deposit collection instruments.