NRB to inject Rs 2 billion

KATHMANDU, May 18: Responding to the deepening shortage of liquidity--the cash held by banks for investments--Nepal Rastra Bank (NRB) is set to inject additional liquidity worth Rs 2 billion by means of repo-loans issued against the treasury bills held by banks. [break]



As per the decision taken today, the central bank will release the amount on Monday, for three days, since the liquid cash that has been absorbed by the subscribing of the ordinary shares of Sunrise Bank in the previous week has been stored at the central bank.



As per the existing rule, the entire sum of the subscribed amount, which was Rs 10 billion--around 28-fold more than the offered amount--has to be deposited in the NRB for seven days. "The additional injection of liquidity will be for just three days, as Rs ten billion worth of liquid cash deposited at the central will start coming back to the market by the end of this week,” said an official with the central bank.



According to the standard procedures set for repo, the central bank will call an auction from the financial institutions to take out loans from the central bank against the treasury bills owned by them. "It is difficult to make guesses, but given the existing interbank rate, it can be expected that the interest rate will be around 7 percent," said the official.



As the result of the liquidity shortage of last week, the interbank rate reached 9 percent, whereas the rate in the previous week was just over 7 percent. The interbank rate, however, has slipped to around 7 percent after the demand for interbank funding dwindled because of the high interest rate.

Related story

Revised interest rate corridor system introduced