KATHMANDU, Jan 20: Nepal Rastra Bank (NRB) is set to absorb Rs 20 billion from the market to manage excess liquidity. The central bank on Sunday invited banks and financial institutions to submit bids for investment.
NRB is collecting funds from the banking system for 84 days through a deposit collection instrument. Banks and financial institutions can submit their bids online until 2 pm.
Revised interest rate corridor system introduced
The interest rate will be determined through a bidding process, and NRB has stated that payment will be made on Chaitra 29. Due to weak credit demand and the accumulation of liquidity in banks, NRB has absorbed around Rs 200 billion through nine instruments over the past one month.
Banks currently hold excess liquidity of around Rs 800 billion. Due to high liquidity, bank interest rates have dropped to below 2.75 percent.
With loan demand remaining weak, a large volume of liquidity has piled up in banks and financial institutions. To manage this situation, NRB has adopted a policy of absorbing funds from the system using deposit collection instruments.
Through this tool, NRB collects funds from banks for a fixed period, helping reduce liquidity and prevent interest rates from falling excessively, thereby supporting monetary stability.
In recent days, the interbank interest rate has fallen below 2.75 percent, indicating excess liquidity. For this reason, NRB has been repeatedly issuing instruments over the past month to absorb liquidity.
