KATHMANDU, Jan 18: The Nepal Rastra Bank (NRB) mopped Rs 20 billion from the market to manage excess liquidity in the banking system. The central bank on Sunday invited banks and financial institutions to submit bids for investment through its deposit collection instrument.
Under the plan, NRB will withdraw funds from the system for a period of 84 days. Banks and financial institutions were invited to submit their bids online until 2:00 PM. The interest rate will be determined through a bidding process and the central bank has said the repayment will be made on March 29.
Revised interest rate corridor system introduced
With weak credit demand leading to an accumulation of excess liquidity in banks, NRB has absorbed around Rs 200 billion over the past month through nine separate instruments. Currently, banks are estimated to be holding excess liquidity of around Rs 800 billion.
Due to high liquidity, interest rates in the banking system have fallen to below 2.75 percent. The interbank interest rate has also dropped below this level, indicating surplus liquidity in the system.
As credit demand remains subdued, NRB has continued to use deposit collection instruments to withdraw excess funds from banks. The central bank said this measure helps prevent interest rates from falling excessively and supports overall monetary stability.
